Income Taxes

12 Months Ended

Jun. 30, 2024

Income Taxes

Income Taxes

NOTE 8 - Income Taxes

The provision for income taxes represents Federal, foreign, and state and local income taxes. The effective rate differs from statutory rates due to the effect of state and local income taxes, tax rates in foreign jurisdictions, global intangible low-taxed income (“GILTI”), tax benefit of R&D credits, and certain nondeductible expenses. Our effective tax rate will change based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, and state and local income taxes.

The amounts of income before income taxes attributable to domestic and foreign operations were as follows:

	For the Year ended June 30,
	2024		2023		2022
Domestic	$	6,936	$	4,926	$	6,461
Foreign		49,450		26,302		15,385
Total	$	56,386	$	31,228	$	21,846

The provision for income taxes is comprised of the following (in thousands):

	For the Year ended June 30,
	2024		2023		2022
Current income taxes:
Federal	$	8,329	$	5,899	$	2,161
State		1,015		1,020		300
		9,344		6,919		2,461
Deferred income taxes:
Federal		(2,367)		(2,334)		(214)
State		(409)		(484)		—
		(2,776)		(2,818)		(214)
Provision for income taxes	$	6,568	$	4,101	$	2,247

A reconciliation of the U.S. Federal statutory income tax rate to our actual effective tax rate on earnings before income taxes is as follows for the years ended June 30, (dollars in thousands):

	2024				2023				2022
			% of				% of				% of
			Pre-tax				Pre-tax				Pre-tax
	Amount		Income		Amount		Income		Amount		Income
Tax at Federal statutory rate	$	11,841	21.0	%	$	6,558	21.0	%	$	4,588	21.0	%
Increases (decreases) in taxes resulting from:
Meals and entertainment		66	0.1	%		48	0.2	%		29	0.1	%
State income taxes, net of Federal income tax benefit		935	1.7	%		436	1.4	%		238	1.1	%
Global intangible low-taxed income		5,259	9.3	%		2,739	8.8	%		1,697	7.8	%
R&D Credit		(632)	(1.1)	%		(661)	(2.1)	%		(554)	(2.5)	%
Executive Compensation		47	0.1	%		—	—	%		—	—	%
Foreign Source income not subject to Tax		(10,518)	(18.7)	%		(5,524)	(17.7)	%		(3,231)	(14.8)	%
Non-taxable debt extinguishment		—	—	%		—	—	%		(820)	(3.8)	%
Uncertain Tax Positions		78	0.1	%		63	0.2	%		20	0.1	%
Other, net		(508)	(0.9)	%		442	1.4	%		280	1.3	%
Effective tax rate	$	6,568	11.6	%	$	4,101	13.1	%	$	2,247	10.3	%

Deferred tax assets and deferred tax liabilities at June 30, 2024 and 2023 are as follows (in thousands):

	Deferred Tax Assets (Liabilities)
	2024		2023
Accounts receivable	$	8	$	22
Inventories		541		397
Accrued liabilities		676		857
Stock based compensation expense		452		250
Revenue reserves		439		333
Unrealized loss on marketable securities		136		124
Capitalized research and development cost		5,447		2,923
Other		2		4
Total Deferred Tax Assets	$	7,701	$	4,910
Valuation allowance		—		—
Deferred income tax assets, net of valuation allowance	$	7,701	$	4,910
Intangibles		(874)		(916)
Property, plant and equipment		(786)		(729)
Other deferred tax liabilities		(613)		(613)
Total Deferred Tax Liability	$	(2,273)	$	(2,258)
Net Deferred Tax Asset	$	5,428	$	2,652

The Company has identified the United States and New York State as its major tax jurisdictions. Fiscal years 2021 and forward are still open for examination, in addition to fiscal year 2018, which is subject to a six year statute of limitations. In addition, the Company has a wholly-owned subsidiary which operates in a Free Zone in the Dominican Republic (“DR”) and is exempt from DR income tax.

The provision for income taxes represents Federal, foreign, and state and local income taxes. The effective rate differs from statutory rates due to the effect of tax rates in foreign jurisdictions, state and local income taxes, tax benefit of R&D credits, certain nondeductible expenses, uncertain tax positions and global intangible low-taxed income ("GILTI").

During the year ending June 30, 2024, the Company did not increase or decrease its reserve for uncertain income tax positions. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense and accrued income taxes. As of June 30, 2024, the Company had accrued interest totaling $217,000, penalties totaling $5,000, and $700,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period. The Company does not expect that its unrecognized tax benefits will significantly change within the next twelve months. The Company claims R&D tax credits on eligible research and development expenditures. The R&D tax credits are recognized as a reduction to income tax expense.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2024		2023		2022
Balance of gross unrecognized tax benefits as of Beginning of Year	$	700	$	678	$	678
Increase to unrecognized tax benefits resulting from a state filing tax position		—		22		—
Balance of gross unrecognized tax benefits as of End of Year	$	700	$	700	$	678