INCOME TAXES

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

5.       INCOME TAXES

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property (“QIP”). Under ASC 740, the effects of new legislation are recognized upon enactment.

As of June 30, 2020, we have, as a result of the technical amendments made by the CARES Act to QIP, accelerated tax depreciation expenses of approximately $94,000, which represents favorable temporary book-to-tax timing differences (i.e., no effective tax rate impact) for income tax purposes and are recorded as components within our deferred income tax assets and income tax receivable, included in prepaid expenses and other current assets, on our balance sheets. We do not expect the other provisions of the CARES Act to materially impact our business or our tax provision. The provision for income taxes consists of the following amounts (in thousands):

	Years Ended June 30,
	2020			2019
Current:
Federal	$	1,542		$	(140	)
State		270			21
Deferred:
Federal		(243	)		1,079
State		221			339
Income tax expense	$	1,790		$	1,299

The effective income tax rate from income (loss) from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages).

	Years Ended June 30,
	2020						2019
	Amount			Percent Pretax Income			Amount			Percent Pretax Income
Income before income taxes	$	7,902			100	%	$	5,447			100	%
Computed “expected” income tax expense on income before income taxes	$	1,659			21	%	$	1,135			21	%
State tax, net of federal benefit		440			6	%		281			5	%
Tax incentives		(85	)		(1	%)		(85	)		(1	%)
Change in valuation allowance		(227	)		(3	%)		11			—
Tax law changes		—			—			(8	)		—
Domestic production deduction		—			—			8			—
Other		3			—			(43	)		(1	%)
Income tax expense	$	1,790			23	%	$	1,299			24	%

Deferred income taxes reflect the net effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):

	June 30,
	2020			2019
Deferred tax assets:
Federal & state NOL carryforward	$	21		$	23
Research & other credits		65			347
Reserves and accruals		438			431
Stock based compensation		110			9
Unrealized losses		455			—
Inventory		334			357
Other intangibles		—			37
Other		—			147
Total gross deferred tax assets	$	1,423		$	1,351
Less: valuation allowance		(543	)		(477	)
Total deferred tax assets		880			874

	June 30,
	2020			2019
Deferred tax liabilities:
Property and equipment, principally due to differing depreciation methods	$	(577	)	$	(527	)
Deferred state tax		(33	)		(81	)
Other		(11	)		(6	)
Total gross deferred tax liabilities		(621	)		(614	)
Net deferred tax assets	$	259		$	260

Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. As of June 30, 2020, our deferred tax asset valuation allowance primarily consists of unrealized capital loss for investments held and the state net operating loss carryforwards for states in which we have filed a final return. For the year ended June 30, 2020, we recorded a net increase to our valuation allowance of $66,000, on the basis of management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized.

As of June 30, 2020, we did not have any net operating losses for federal and state income tax purposes for state jurisdictions in which we currently operate. We have no federal research and development and alternative minimum tax credit carry forwards at June 30, 2020. State tax research credit carry forwards at June 30, 2020, amount to $65,000, the majority of which do not expire.

As of June 30, 2020, we have accrued $524,000 of unrecognized tax benefits related to federal and state income tax matters that would reduce our income tax expense if recognized. If we are eventually able to recognize our uncertain tax positions, our effective tax rate would be reduced. Any adjustment to our uncertain tax positions would result in an adjustment of our tax credit carryforwards rather than resulting in a cash outlay.

Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands):

	June 30,
	2020			2019
Unrecognized tax benefits:
Beginning balance	$	490		$	462
Additions based on federal tax positions related to the current year		15			11
Additions based on state tax positions related to the current year		13			11
Additions for tax positions of prior years		55			6
Reductions due to lapses in statutes of limitation		(49	)		—
Ending balance	$	524		$	490

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examinations, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next twelve months.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense when applicable. As of June 30, 2020, no interest or penalties applicable to our unrecognized tax benefits have been accrued since we have sufficient tax attributes available to fully offset any potential assessment of additional tax.

We are subject to U.S. federal income tax, as well as income tax of California, Maryland, Massachusetts, and Colorado. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2017, and later.  However, because of our prior net operating losses and research credit carryovers, substantially all of our tax years are open to audit.