Income Taxes

12 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

11. INCOME TAXES

The provision for income taxes on continuing operations are as follows:

	2021		2020
Current	$	63	$	296
Deferred		0		0
Total income tax expense	$	63	$	296

Net deferred income tax assets recorded in the consolidated balance sheets are as follows:

	June 30,
	2021			2020
Net operating loss carryforward	$	5,856		$	6,078
Depreciation expense		(98	)		(86	)
Allowances for receivables		117			131
Accrued liabilities		268			1,407
Intangible assets		263			585
Pension liabilities		113			165
Other		181			109
		6,700			8,389
Less valuation allowance		(6,700	)		(8,389	)
Net deferred income tax assets	$	0		$	0

The differences between income taxes on continuing operations at the Federal statutory rate and the effective tax rate were as follows:

	2021			2020
Income tax expense (benefit) at Federal statutory rate	$	1,470		$	(61	)
Changes in valuation allowance—continuing operations		(1,076	)		(369	)
U.S. state income taxes, net of federal benefit		188			175
Prior year true-ups associated with CARES Act receipts		(587	)		0
Permanent differences relating to CARES Act receipts		(56	)		582
Deferred tax rate changes		77			(34	)
Other		47			3
Total income tax expense (benefit)—continuing operations	$	63		$	296

Key income tax provisions of the CARES Act include new health-care funding, loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code.  The corporate income tax provisions of the CARES Act include allowing the carryback of net operating losses (“NOL”) generated in recent tax years, temporary removal of the 80% NOL usage limitation put in place under the Tax Cuts and Jobs Act (“TCJA”) enacted on December 27, 2017, temporary favorable adjustments to the business interest expense limitation calculated under Sec. 163(j), and the acceleration of refundable Alternative Minimum Tax (“AMT”) credits.

Of the CARES Act provisions, the most material income tax considerations related to the Company are related to the amounts for ERC and amounts received as general and targeted PRF. Based on the latest published IRS guidance as of the preparation of the June 30, 2021 financial statements, PRF (to the extent the applicable terms and conditions required to retain the funds are met “Retainable PRF”) are fully includable in taxable income in the Company’s tax returns in the fiscal year received. ERC are included in tax income in the Company’s tax returns in the quarter in which the payroll expenses for which the credits offset are deductible. ERC results in qualified wages being disallowed as a deduction for the portion of the wages paid equal to the sum of the payroll tax credit taken in the associated quarter. For amounts received and forgiven under the PPP loans, due to the enactment of the Consolidated Appropriations Act, 2021, on December 27, 2020, Congress specifically allows the deduction of any expenses associated with forgiven PPP loan proceeds.  It is the Company’s assumption at June 30, 2021 that all PPP Loan associated expenses will be deductible for income tax. The Company has sufficient federal net operating losses for the period to cover the resulting provisional June 30, 2021 taxable income, The year ended June 30, 2021 current tax expense represents the state income tax accrued resulting the ERC accrued and associated disallowed wages and PRF received during the period.

In accordance with the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 740, we evaluate our deferred taxes quarterly to determine if adjustments to our valuation allowance are required based on the consideration of available positive and negative evidence using a “more likely than not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors, our historical operating results, our expectation of future results of operations, the duration of applicable statuary carryforward periods and conditions of the healthcare industry. The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in which the related temporary differences in the financial basis and the tax basis of the assets become deductible. The value of our deferred tax assets will depend on applicable income tax rates.

At June 30, 2021, consistent with the above process, we evaluated the need for a valuation allowance against our deferred tax assets and determined that it was more likely than not that none of our deferred tax assets would be realized. As a result, in accordance with ASC 740, we recognized a valuation allowance of $6,700 against the deferred tax asset so that there is no net long-term deferred income tax asset or liability at June 20, 2021. We conducted our evaluation by considering available positive and negative evidence to determine our ability to realize our deferred tax assets. In our evaluation, we gave more significant weight to evidence that was objective in nature as compared to subjective evidence. Also, more significant weight was given to evidence that directly related to our current financial performance as compared to less current evidence and future performance.

The principal negative evidence that led us to determine at June 30, 2021 that all the deferred tax assets should have full valuation allowances was the projected current fiscal year tax loss disregarding unusual items associated with the CARES Act discussed above, history of losses as well as the underlying negative business conditions for rural healthcare businesses in which our Healthcare Services Segment businesses operate and the Federal income tax net operating loss carry-forward of approximately $15,631.

For Federal income tax purposes, at June 30, 2021, the Company had approximately $15,631 of estimated net operating loss carry-forwards available for use in future years subject to the limitations of the provisions of Internal Revenue Code Section 382. These net operating loss carryforwards expire primarily in fiscal 2023 through fiscal 2038; however, with the enactment of the Tax Cut and Jobs Act on December 22, 2017, federal net operating loss carryforwards generated in taxable years beginning after December 31, 2017 now have no expiration date. The Company’s returns for the periods prior to the fiscal year ended June 30, 2018 are no longer subject to potential federal and state income tax examination.