Income Taxes

9 Months Ended

Mar. 31, 2025

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 from quarter to quarter 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. In addition, changes in judgment from the evaluation of new information resulting in the recognition de-recognition or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.

For the nine months ended March 31, 2025 the Company recognized total pre-tax book income of $37,100,000, comprised of $5,325,000 and $31,775,000 of domestic and foreign pre-tax book income, respectively.

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 March 31, 2025, the Company had accrued interest totaling $268,000, as well as $754,000 of unrecognized net tax benefits that, if recognized, would favorably affect the Company’s effective income tax rate in any future period. For the nine months ended March 31, 2025, additional tax liability and interest expense were accrued for in the amount of $54,000 and $50,000, respectively.

The company has FIN 48 liabilities accrued due to historic Section 956 positions. These positions would not be reversed until the earlier of when the statute of limitation lapses noting that Section 956 adjustments are subject to a 6-year period under the constructive dividend rules, or the position is effectively settled via an IRS audit. Based on the tax returns filed in April of 2019, the six year statute of limitations would expire during Q4 of June 30, 2025.

We file a consolidated U.S. income tax return and tax returns in certain state and local and foreign jurisdictions. As of March 31, 2025, 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.