Note

– 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

2015

forward, while state income tax returns are generally open from

2013

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,
	2017			2016			2015
	(in thousands)
Current tax (benefit) expense:
Federal	$	10,398		$	9,801		$	8,652
State		2,032			1,240			1,067
		12,430			11,041			9,719
Deferred tax (benefit) expense:
Federal		(3,905	)		(5,064	)		(3,678	)
State		(924	)		(557	)		(281	)
		(4,829	)		(5,621	)		(3,959	)
Total income tax provision	$	7,601		$	5,420		$	5,760

June 30, 2017

and

2016,

the Company had an income taxes receivable balance of

$1,088,000

and

$121,000

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,
	2017			2016
	(in thousands)
Deferred income tax liabilities:
Tax operating leases	$	7,811		$	13,799
Deferred selling expenses		1,033			1,072
Depreciation		620			632
Other investments		-			673
Total liabilities		9,464			16,176
Deferred income tax assets:
Allowances and reserves		(2,993	)		(3,061	)
State income taxes		(711	)		(434	)
Other investments		(186	)
Stock-based compensation		(5	)		(7	)
Total assets		(3,895	)		(3,502	)
Net deferred income tax liabilities	$	5,569		$	12,674

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

	Years ended June 30,
	2017			2016			2015
Federal statutory rate		35.00	%		35.00	%		35.00	%
State tax, net of Federal benefit		5.92			4.86			5.31
Other, mainly tax exempt leases		(0.32	)		(1.36	)		(1.41	)
Derecognition of uncertain tax positions		-			-			-
Effective rate		40.60	%		38.50	%		38.90	%

As of

June 30, 2017,

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, 2017,

accrued penalties and interest on unrecognized tax benefits are estimated to be

$35,000.

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

	Years ended June 30,
	2017			2016
	(in thousands)
Balance, beginning of period	$	188		$	188
Increase for tax positions in current year		36			47
Increase (decrease) for tax positions taken in prior years		(38	)		(48	)
Increase (decrease) for interest and penalties		2			1
Balance, end of period	$	188		$	188

June 30, 2017,

there were

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.