Note 13 - Income Taxes

12 Months Ended

Jun. 30, 2016

Note 13 – Income Taxes

The Company accounts for its income taxes under ASC 740, “Income Taxes.” Among other provisions, this standard requires deferred tax balances to be determined using the enacted income tax rate for the years in which taxes will be paid or refunds received. The Company is subject to U.S. Federal income tax jurisdiction, as well as multiple state and local jurisdictions as a result of doing business in most states. The Company’s Federal tax returns remain subject to examination from 2014 forward, while state income tax returns are generally open from 2012 forward, and vary by individual state statute of limitation. The Company believes that its accrual for income taxes is adequate for adjustments, if any, which may result from these examinations.

The provision for income taxes is summarized as follows:

	Years ended June 30,
	2016			2015			2014
	(in thousands)
Current tax (benefit) expense:
Federal	$	9,801		$	8,652		$	6,299
State		1,240			1,067			912
		11,041			9,719			7,211
Deferred tax (benefit) expense:
Federal		(5,064	)		(3,678	)		(2,792	)
State		(557	)		(281	)		(397	)
		(5,621	)		(3,959	)		(3,189	)
	$	5,420		$	5,760		$	4,022

At June 30, 2016 and 2015, the Company had an income taxes receivable balance of $121,000 and $231,000 respectively.

Deferred taxes result principally from the method of recording lease income on capital leases and depreciation methods for tax reporting, which differ from financial statement reporting. Deferred income tax liabilities (assets) are comprised of the following:

	June 30,
	2016			2015
	(in thousands)
Deferred income tax liabilities:
Tax operating leases	$	13,799		$	14,003
Deferred selling expenses		1,072			965
Depreciation		632			77
Other investments		673			19
Total liabilities		16,176			15,064
Deferred income tax assets:
Allowances and reserves		(3,061	)		(2,741	)
State income taxes		(434	)		(374	)
Stock-based compensation		(7	)		(5	)
Total assets		(3,502	)		(3,120	)
Net deferred income tax liabilities	$	12,674		$	11,944

The differences between the federal statutory income tax rate and the Company's effective tax rate are as follows:

	Years ended June 30,
	2016			2015			2014
Federal statutory rate		35.00	%		35.00	%		35.00	%
State tax, net of Federal benefit		4.86			5.31			4.65
Other, mainly tax exempt leases		(1.36	)		(1.41	)		(2.25	)
Derecognition of uncertain tax positions		-			-			(1.10	)
Effective rate		38.50	%		38.90	%		36.30	%

As of June 30, 2016, there was $188,000 of unrecognized tax benefits, all of which, if recognized, would affect the effective tax rate. The Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2016, accrued penalties and interest on unrecognized tax benefits are estimated to be $34,000.

The following table sets forth the change in unrecognized tax benefits:

	Years ended June 30,
	2016			2015
	(in thousands)
Balance, beginning of period	$	188		$	188
Increase for tax positions in current year		47			47
Increase (decrease) for tax positions taken in prior years		(48	)		(48	)
Increase (decrease) for interest and penalties		1			1
Balance, end of period	$	188		$	188

At June 30, 2016, there were no material changes to the liability for uncertain tax positions and unrecognized tax benefits. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons; including additions related to current year tax provisions, the expiration of the statute of limitations on open tax years, the status of examinations and changes in management judgment.