Note 10 - Income Taxes

3 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 10. INCOME TAXES

The Company and its non-Canadian subsidiaries file a consolidated U.S. federal income tax return. USCAN files a separate tax return in Canada. Provisions for income taxes include deferred taxes for temporary differences in the bases of assets and liabilities for financial and tax purposes resulting from the use of the liability method of accounting for income taxes.

Income tax expense for the quarter is based upon the estimated annual ordinary income in each jurisdiction in which the Company operates. The tax effects of discrete items are recognized in the tax provision in the period they occur in accordance with U.S. GAAP. Due to various factors, such as the item’s significance in relation to total ordinary income and the rate of tax, discrete items in any quarter can materially impact the reported effective tax rate. The effective tax rate was 27.8 percent and 27.0 percent for the three months ended September 30, 2024, and 2023, respectively.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. A valuation allowance of $2,000 was included to fully reserve for Canadian net operating loss carryovers at September 30, 2024. There was no valuation allowance included at June 30, 2024.

The Company maintains a reserve for uncertain tax positions for income tax matters. As of September 30, 2024, and June 30, 2024, the total reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, was $802,000 and $785,000, respectively, which is included within long-term liabilities on the Consolidated Balance Sheets. The Company believes the reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, of $802,000 adequately covers open tax years and uncertain tax positions up to and including September 30, 2024, for major taxing jurisdictions. As of September 30, 2024, the entire $802,000 of unrecognized tax benefits, if recognized, would impact the Company's effective income tax rate.