|3 Months Ended|
Sep. 30, 2021
|Income Tax Disclosure [Abstract]|
12. INCOME TAXES
Net income from operations before provision for income taxes is shown below:
The Company files a consolidated federal income tax return based on a June 30 tax year end. The provision for income tax expense by jurisdiction and the effective tax rate for the three months ended September 30, 2021 and 2020 are shown below:
Our effective tax rate was approximately 20.3% and 21.5% for the three months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021, our effective tax rate differs from the federal statutory rate primarily due to the excess tax benefit from share based compensation, the foreign derived intangible income special deduction, offset by state taxes (net of federal tax benefit), and other normal course non-deductible expenditures. For the three months ended September 30, 2020, the Company recorded tax expense which differed from the statutory rates primarily due to the foreign derived intangible income special deduction, offset by state taxes (net of federal tax benefit), and other normal course non-deductible expenditures.
Tax Balances and Activity
Income Taxes Receivable and Payable
As of September 30, 2021 and June 30, 2021, income tax payable totaled $7.1 million and $5.0 million, respectively.
Deferred Tax Assets and Liabilities
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized by evaluating both positive and negative evidence. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of September 30, 2021 and June 30, 2021, management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S. federal and state deferred tax assets. We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets. A tax valuation allowance was considered unnecessary as of management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S. federal and state deferred tax assets.
As of September 30, 2021, the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax liability of $1.5 million and a federal deferred tax liability of $16.5 million. As of June 30, 2021, the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax liability of $1.7 million primarily comprised of net operating loss carryforwards and a federal deferred tax liability of $17.8 million.
On March 19, 2021, JMB became a wholly owned subsidiary of the Company as a result of our acquisition of the remaining interest that we did not previously own. On the Acquisition Date, the Company has considered the deferred tax impact of the excess fair value of the assets and liabilities accounted for in the business combination over their historical cost basis. Included in the June 30, 2021 balance is $21.1 million of deferred tax liabilities, $20.8 million of which relates to the excess fair value of intangibles other than goodwill over their historical cost basis and $0.3 million relating to JMB’s historical carryover deferred taxes that we assumed.
Net Operating Loss Carryforwards
As of September 30, 2021 and June 30, 2021, the Company has approximately $12.2 million and $12.2 million, state and city net operating loss carryforwards, respectively. The Company's combined state and city tax-effected net operating loss carryforwards totaled, as of September 30, 2021 and June 30, 2021, $0.9 million and $0.9 million, respectively. These state and city net operating loss carryforwards start to expire in the year ending June 30, 2030.
Unrecognized Tax Benefits
The Company has taken or expects to take certain tax benefits on its income tax return filings that it has not recognized a tax benefit (i.e., an unrecognized tax benefit) on its condensed consolidated statements of income. The Company's measurement of its uncertain tax positions is based on management's assessment of all relevant information, including, but not limited to prior audit experience, audit settlement, or lapse of the applicable statute of limitations. For the three months ended September 30, 2021, there was no material movement in unrecognized tax benefits including interest and penalties.
In fiscal 2021, JMB became a wholly owned subsidiary of the Company as a result of our taxable stock purchase of the remaining interest in JMB. We have considered JMB in our analysis of unrecognized tax benefit and increases during the year reflect certain inherited uncertain tax positions of JMB.
There has been no material change to our open tax examinations. Information related to open tax examinations is included in our 2021 Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef