Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
13. INCOME TAXES Net income from operations before provision for income taxes for the years ended June 30, 2022 and 2021 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 years ended June 30, 2022 and 2021 are shown below:
Our effective tax rate was approximately 20.0% and 16.5% for the years ended June 30, 2022 and 2021, respectively. For the year ended June 30, 2022, our effective tax rate differs from the federal statutory rate primarily due to the excess tax benefit from share-based compensation, foreign derived intangible income special deduction, partially offset by state taxes (net of federal tax benefit). For the year ended June 30, 2021, our effective tax rate differs from the federal statutory rate primarily due to adjustments related to our acquisition of JMB, foreign derived intangible income special deduction, partially offset by state taxes (net of federal tax benefit). A reconciliation of the income tax provisions to the amounts computed by applying the statutory federal income tax rate to income before income tax provisions for the years ended June 30, 2022 and 2021, are set forth below:
Tax Balances and Activity Income Taxes Receivable and Payable As of June 30, 2022 and June 30, 2021, income tax payable totaled $0.4 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 June 30, 2022 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 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 June 30, 2022, the 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 $0.9 million and a federal deferred tax liability of $14.5 million. As of June 30, 2021, the 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 and a federal deferred tax liability of $17.8 million. The schedule of deferred taxes presented below summarizes the components of deferred taxes that have been classified as deferred tax assets and deferred tax liabilities related to taxable and deductible temporary differences as of June 30, 2022 and June 30, 2021:
Net Operating Loss Carryforwards As of June 30, 2022 and June 30, 2021, the Company has approximately $12.2 million and $12.2 million of state net operating loss carryforwards, respectively. The Company's state tax-effected net operating loss carryforwards totaled $0.9 million and $0.9 million, as of June 30, 2022 and June 30, 2021, respectively. These state 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 as a tax benefit (i.e., an unrecognized tax benefit) on its 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. Below is a reconciliation of the net unrecognized tax benefits for the years ended June 30, 2022 and 2021:
In addition to the $146,000 of accrued tax expense, as shown in the table above, the Company has $46,000 of interest and $37,000 of penalties accrued to date related to its uncertain tax positions. As of June 30, 2022, the amount of this accrued liability (inclusive of the uncertain tax deductions and the associated interest and penalty accrual) totaled $229,000, and, if recognized, would reduce the Company's effective tax rate. Tax Examinations During the year ended June 30, 2022, the Internal Revenue Service completed the examination of JMB’s 2018 income tax year and made no changes to the reported tax. |