The Company utilizes the liability method of accounting for income taxes. The liability method measures the expected income tax impact of future taxable income and deductions implicit in the Consolidated Balance Sheets. The income tax provision in 2017 and 2016 consisted of the following:
|
| | | | | | | | |
Year Ended June 30, | | 2017 | | 2016 |
Current: | | |
| | |
|
Federal | | $ | 19,822 |
| | $ | 169,350 |
|
State | | 425 |
| | 2,675 |
|
Deferred | | 170,299 |
| | 702,013 |
|
Total income tax provision | | $ | 190,546 |
| | $ | 874,038 |
|
The 2017 and 2016 tax results in an effective rate different than the federal statutory rate because of the following:
|
| | | | | | | | |
Year Ended June 30, | | 2017 | | 2016 |
Federal income tax (benefit) expense at statutory rate | | $ | (262,851 | ) | | $ | 769,433 |
|
State income tax (benefit) expense, net of federal income tax benefit | | (32,287 | ) | | 91,660 |
|
Increase (decrease) in valuation allowance | | 444,000 |
| | (370,000 | ) |
Stock-based compensation | | 51,197 |
| | 447,180 |
|
Other | | (9,513 | ) | | (64,235 | ) |
Total income tax provision | | $ | 190,546 |
| | $ | 874,038 |
|
Temporary differences which give rise to deferred income tax assets and liabilities at June 30, 2017 and June 30, 2016 include:
|
| | | | | | | | |
| | 2017 | | 2016 |
Deferred income tax assets: | | |
| | |
|
Deferred compensation | | $ | 904,435 |
| | $ | 864,954 |
|
Stock-based compensation | | 621,966 |
| | 603,159 |
|
Accrued expenses and reserves | | 1,280,181 |
| | 1,390,910 |
|
Federal and state net operating loss carryforwards | | 751,021 |
| | 418,296 |
|
Valuation allowance | | (444,409 | ) | | (409 | ) |
Other | | — |
| | 5,979 |
|
Total deferred income tax assets | | 3,113,194 |
| | 3,282,889 |
|
| | | | |
Deferred income tax liabilities: | | |
| | |
|
Equipment and leasehold improvements | | (67,675 | ) | | (67,390 | ) |
Other | | (3,262 | ) | | (2,943 | ) |
Net deferred income tax assets | | $ | 3,042,257 |
| | $ | 3,212,556 |
|
Deferred income tax balances reflect the effects of temporary differences between the tax bases of assets and liabilities and their carrying amounts. These differences are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The recognition of these deferred tax balances will be realized through normal recurring operations and, as such, the Company has recorded the value of such expected benefits. The Company has federal net operating loss carryforwards totaling $701,523 which expire in fiscal years 2035 through 2037. The Company has net operating loss carryforwards in the state of Wisconsin totaling $6,270,994 which expire in fiscal years 2030 through 2037. In addition, the Company has operating loss carryforwards in other states totaling $431,107, which expire in fiscal years 2026 through 2037.
ASC Topic 740 "Income Taxes" prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. There were no additional significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return that have been recorded on the Company’s consolidated financial statements for the year ended June 30, 2017.
Additionally, ASC Topic 740 provides guidance on the recognition of interest and penalties related to income taxes. No interest or penalties related to income taxes has been accrued or recognized as of and for the years ended June 30, 2017 and 2016. The Company records interest related to unrecognized tax benefits in interest expense.
The Company does not believe it has any unrecognized tax benefits as of June 30, 2017 and 2016. Any changes to the Company's unrecognized tax benefits during the fiscal years ended June 30, 2017 and 2016 would impact the effective tax rate.
The Company files income tax returns in the United States federal jurisdiction and in several state jurisdictions. The Company’s federal tax returns for tax years beginning July 1, 2013 or later are open. For states in which the Company files state income tax returns, the statute of limitations is generally open for tax years ended June 30, 2013 and forward.
The following are the changes in the valuation allowance:
|
| | | | | | | | | | | |
Year Ended June 30, | | Balance, beginning of year | | (Increase) decrease
in valuation
allowance | | Balance, end of year |
2017 | | $ | (409 | ) | | (444,000 | ) | | $ | (444,409 | ) |
2016 | | $ | (370,409 | ) | | 370,000 |
| | $ | (409 | ) |