INCOME TAXES Level 1 (Notes)

12 Months Ended

Jul. 31, 2020

INCOME TAXES

The provision for income tax expense by fiscal year consists of the following (in thousands):



	2020			2019
Current
Federal	$	3,768		$	(529	)
Foreign	5			(5		)
State	999			1,416
Current Income Tax Total	4,772			882
Deferred
Federal	(610		)	1,344
Foreign	(3		)	113
State	121			(406		)
Deferred Income Tax Total	(492		)	1,051
Total Income Tax Expense	$	4,280		$	1,933

Principal reasons for variations between the statutory federal rate and the effective rates by fiscal year were as follows:



	2020		2019
U.S. federal income tax rate	21.0	%	21.0	%
Depletion deductions allowed for mining	(4.8	)	(8.2	)
State income tax expense, net of federal tax expense	4.3		2.5
Difference in effective tax rate of foreign subsidiaries	1.2		0.2
Prior year income taxes	(1.0	)	(1.9	)
Other	(2.1	)	(0.3	)
Effective income tax rate	18.6	%	13.3	%

The Consolidated Balance Sheets included the following tax effects of cumulative temporary differences as of July 31 (in thousands):



	2020					2019
	Assets			Liabilities		Assets			Liabilities
Depreciation	$	—		$	3,926	$	—		$	3,995
Deferred compensation	1,779			—		2,121			—
Postretirement benefits	3,293			—		6,100			—
Lease right of use assets	—			2,534		—			—
Lease liabilities	2,918			—		—			—
Allowance for doubtful accounts	178			—		81			—
Deferred marketing expenses	—			194		—			326
Other assets	—			9		390			—
Accrued expenses	4,131			—		2,076			—
Tax credits	147			—		250			—
Amortization	48			—		166			—
Inventories	343			—		264			—
Depletion	—			173		—			173
Stock-based compensation	987			—		556			—
Reclamation	447			—		392			—
Other assets – foreign	790			—		585			—
Valuation allowance	(923		)	—		(732		)	—
Total deferred taxes	$	14,138		$	6,836	$	12,249		$	4,494

Deferred taxes for postretirement benefits were also affected by employer contributions and the freeze of our pension plan that significantly reduced our pension liability. See Note 8 of the Notes to the Consolidated Financial Statements for further information about postretirement benefits. Deferred taxes for lease right of use assets and liabilities were recorded upon the implementation of ASC 842, Leases, on August 1, 2019. See Notes 1 and 11 of the Notes to the Consolidated Financial Statements for further information about leases. Deferred taxes for accrued expenses reflected a higher accrual for the annual discretionary bonus.

We recorded a valuation allowance of $923,000 and $732,000 as of July 31, 2020 and July 31, 2019, respectively, for the amount of the deferred tax benefit related to our foreign net operating loss carryforwards since we believe it is unlikely we will realize the benefit of these tax attributes in the future. As of July 31, 2020, we have total net operating loss carryforwards from state jurisdictions of approximately $2,000,000. The carryforward expiration dates vary by state. No valuation allowance has been established for these carryforwards since we expect our future profitability will allow us to fully realize these tax benefits.

Our foreign subsidiaries in the United Kingdom and China have not generated any untaxed foreign income, therefore we have not provided for any related income taxes.

We had no material liability for unrecognized tax benefits based on tax positions related to the current and prior fiscal years as of July 31, 2020 and 2019; correspondingly, no related interest and penalties were recognized as income tax expense and there were no accruals for such items in either of these fiscal years.

We are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. We have no income tax returns under examination as of July 31, 2020 and federal tax returns for fiscal years 2018 and 2019 remain open for examination. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. The state impact of any federal income tax changes remains subject to examination by various states for a period of up to one year after formal notification to the states. There are a limited number of open state and local income tax audits in which no material issues have been preliminarily identified. There are no material open or unsettled foreign income tax audits. We believe our accrual for tax liabilities is adequate for all open audit years.