Note 11 - Income Taxes

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 11 — INCOME TAXES

The following information is provided for the years ended June 30:

(In thousands)	2023			2022
Components of income (loss) before income taxes:
United States	$	31,701		$	20,124
Foreign		1,625			(1,039	)
Income before income taxes	$	33,326		$	19,085
Provision for income taxes
U.S. Federal	$	6,327		$	3,586
Foreign		325			165
State and local		1,330			644
Total current	$	7,982		$	4,395
Deferred		(418	)		(342	)
Total provision for income taxes	$	7,564		$	4,053

(In thousands)	2023			2022
Reconciliation to federal statutory rate:
Federal statutory rate		21.0	%		21.0
State and local taxes, net of federal benefit		2.9			3.0
Foreign operations		0.6			-
Federal tax credits		(1.0	)		(1.0	)
Uncertain tax position activity		-			(0.3	)
Stock-based compensation		(1.2	)		(0.3	)
Tax rate changes		(0.2	)		(1.4	)
Other		0.6			0.2
Effective tax rate		22.7	%		21.2

The components of deferred income tax assets and (liabilities) at June 30, 2023, and 2022 are as follows:

Components of deferred income tax assets and liabilities
(In thousands)	2023			2022
Uncertain tax positions	$	185		$	169
Reserves against current assets		1,255			1,110
Accrued expenses		3,381			2,596
Deferred compensation		1,459			1,195
Stock-based compensation		1,680			1,421
State net operating loss carryover and credits		140			310
Lease Liability		2,397			2,667
Canadian NOL		319			538
U.S. Federal net operating loss carryover and credits		258			1,235
Deferred income tax asset before valuation allowance		11,074			11,241
Valuation allowance		(108	)		(108	)
Deferred income tax asset		10,966			11,133
Goodwill, acquisition costs and intangible assets		(3,749	)		(3,519	)
Depreciation		(1,634	)		(2,205	)
Right of Use Asset		(2,269	)		(2,513	)
Deferred income tax liability		(7,652	)		(8,237	)
Net deferred income tax asset	$	3,314		$	2,896

The Company has U.S. federal net operating loss carry forward deferred tax assets of $0.2 million and $1.1 million at June 30, 2023, and June 30, 2022, respectively. The federal net operating loss carry forward was from the acquisition of JSI in May 2021. The decrease of $0.9 million in fiscal 2023 was from utilization of the net operating loss. The Company has deferred tax assets for research and development credits of $0.1 million at both June 30, 2023, and June 30, 2022. Utilization of the federal net operating losses and research and development credits are limited by Internal Revenue Code Section 382 but are expected to be realized before expiration.

The Company has Canadian net operating loss carry forward deferred tax assets of $0.3 million and $0.5 million at June 30, 2023, and June 30, 2022, respectively. The decrease of $0.2 million was from utilization of the net operating loss. The $0.3 million deferred tax asset was from the acquisition of JSI and has a 20 year carryforward period.

The Company has state net operating loss carryovers and tax credit deferred tax assets of $0.1 million and $0.3 million at June 30, 2023, and June 30, 2022, respectively. A portion of the sate net operating loss carry forward was from the acquisition of JSI in May 2021. A valuation allowance of $0.1 million exists at June 30, 2023, against Oregon tax credits not expected to be used. The Oregon credits are otherwise expected to expire over a 4-year period beginning June 30, 2027.

At June 30, 2023, tax, interest, and penalties, net of potential federal tax benefits, were $0.6 million, $0.3 million, and $0.1 million, respectively, of the total reserve for uncertain tax positions of $1.0 million. The entire uncertain tax position of $0.6 million, net of federal tax benefit, would impact the effective tax rate if recognized.

At June 30, 2022, tax, interest, and penalties, net of potential federal tax benefits, were $0.6 million, $0.3 million, and $0.2 million, respectively, of the total reserve for uncertain tax positions of $1.1 million. The entire uncertain tax position of $0.6 million net of federal tax benefit, would impact the effective tax rate if recognized. The liability for uncertain tax position is included in Other Long-Term Liabilities.

The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Consolidated Statements of Operations. The Company recognized a $0.1 million net tax (benefit)/expense in both fiscal 2023 and fiscal 2022, related to the change in reserves for uncertain tax positions. The Company recognized interest net of federal benefit and penalties of $500 and ($3,000), respectively, in fiscal 2023 and $(8,000) and $(10,000), respectively, in fiscal 2022. The reserve for uncertain tax positions is not expected to change significantly in the next twelve months.

The tax activity in the liability for uncertain tax positions was as follows:

Uncertain tax positions
(In thousands)	2023			2022
Balance at the beginning of the fiscal year	$	647		$	682
Decreases - tax positions in prior period		(134	)		(117	)
Increase - tax positions in current period		143			82
Balance at end of the fiscal year	$	656		$	647

The Company files a consolidated federal income tax return in the United States, and files various combined and separate tax returns in several state and local jurisdictions, and also in Canada, Mexico, and Puerto Rico. In general, the Company is no longer subject to U.S. Federal, state, and local tax examinations by tax authorities for fiscal years ending prior to June 30, 2020. Except that US tax years prior to June 30, 2020, are subject to exam to the extent of the US tax refunds generated from the carry back of the June 30, 2020, federal net operating loss. The IRS completed their examination of the US tax year ended June 30, 2020, and issued a no change report.