Entity information:
NOTE 12. INCOME TAXES

The Company and its non-Canadian subsidiaries file a consolidated U.S. federal income tax return. USCAN and Galileo file separate tax returns in Canada. The current applicable U.S. statutory rate for the consolidated U.S. federal income tax return is approximately 34 percent and the current applicable Canadian statutory rate for the Canadian subsidiaries is approximately 26.5 percent. Provisions for income taxes include deferred taxes for temporary differences in the bases of assets and liabilities for financial and tax purposes, resulting from the use of the liability method of accounting for income taxes. The Company has not recognized deferred income taxes on undistributed earnings of Galileo since such earnings are considered to be reinvested indefinitely.

For U.S. federal income tax purposes at June 30, 2017, the Company has charitable contribution carryovers totaling approximately $147,000 with $68,000; $34,000; $19,000; $5,000; and $21,000 expiring in fiscal years 2018, 2019, 2020, 2021, and 2022, respectively. The Company has U.S. federal net operating loss carryovers of $4.7 million with $2.0 million expiring in fiscal year 2035 and $2.7 million expiring in fiscal year 2036. For Canadian income tax purposes, Galileo has cumulative eligible capital carryovers of $254,000 with no expiration and net operating loss carryovers of $66,000; $120,000; $45,000; $123,000 and $7,000 expiring in fiscal 2025, 2027, 2030, 2036, and 2037, respectively. If certain changes in the Company’s ownership should occur, there could be an annual limitation on the amount of net operating loss carryovers that could be utilized.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. At June 30, 2017, and 2016, a valuation allowance of $3.3 million and $3.1 million, respectively, was included to fully reserve for net operating loss carryovers, other carryovers and book/tax differences in the balance sheet.

The Company’s components of income (loss) before tax by jurisdiction are as follows:

 
  
Year ended June 30,
  
(dollars in thousands)
  
2017
    
2016
    
2015
  
United States
  
$
(188
)
  
$
(3,496
)
  
$
(3,400
)
Canada
    
(339
)
    
(213
)
    
246
  
Total
  
$
(527
)
  
$
(3,709
)
  
$
(3,154
)

The reconciliation of income tax computed for continuing operations at the U.S. federal statutory rates to income tax expense is as follows:

 
  
Year ended June 30,
  
(dollars in thousands)
  
2017
    
% of
 Pretax
    
2016
    
% of
 Pretax
    
2015
    
% of
 Pretax
  
Tax expense (benefit) at statutory rate - continuing operations
  
$
(179
)
    
34.0
%
  
$
(1,255
)
    
34.0
%
  
$
(1,045
)
    
34.0
%
Valuation allowance
    
144
      
(27.3
)%
    
1,067
      
(28.9
)%
    
1,857
      
(60.4
)%
Income from controlled foreign corporation
    
33
      
(6.3
)%
    
51
      
(1.4
)%
    
-
      
0.0
%
Other
    
19
      
(3.6
)%
    
131
      
(3.6
)%
    
10
      
(0.3
)%
Total tax expense (benefit) - continuing operations
  
$
17
      
(3.2
)%
  
$
(6
)
    
0.1
%
  
$
822
      
(26.7
)%

Components of total tax expense (benefit) are as follows:

 
  
Year ended June 30,
  
(dollars in thousands)
  
2017
    
2016
    
2015
  
Continuing Operations
                  
Current tax expense (benefit)  - U.S. Federal
  
$
6
    
$
-
    
$
(21
)
Current tax expense (benefit)  - Non-U.S.
    
11
      
(6
)
    
36
  
Deferred tax expense - U.S. Federal
    
-
      
-
      
807
  
Total tax expense (benefit) - continuing operations
    
17
      
(6
)
    
822
  
 
                        
Discontinued Operations
                        
Current tax benefit - U.S. Federal
    
-
      
-
      
-
  
Total tax expense (benefit)
  
$
17
    
$
(6
)
  
$
822
  

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred assets and liabilities using the effective U.S. statutory tax rate are as follows:

 
  
Year ended June 30,
  
(dollars in thousands)
  
2017
    
2016
  
Book/tax differences in the balance sheet
            
Trading securities
  
$
316
    
$
321
  
Prepaid expenses
    
(92
)
    
(73
)
Accumulated depreciation
    
166
      
142
  
Available-for-sale securities
    
228
      
436
  
Other investments
    
355
      
83
  
Accrued expenses
    
126
      
99
  
Product start-up costs
    
117
      
63
  
Stock-based compensation expense
    
6
      
6
  
Tax Carryovers
                
Net operating loss carryover
    
1,690
      
1,953
  
Cumulative eligible capital carryover
    
67
      
67
  
Charitable contributions carryover
    
50
      
43
  
Capital loss carryover
    
255
      
-
  
Valuation Allowance
    
(3,284
)
    
(3,140
)
Net deferred tax asset
  
$
-
    
$
-
  

In November 2015, the FASB issued accounting guidance that simplifies the presentation of deferred income taxes. The guidance requires that deferred tax balances be classified as non-current in a statement of financial position. The Company adopted this guidance effective September 30, 2016, on a prospective basis. As a full reserve valuation allowance is recorded for deferred tax balances, adoption of the guidance did not result in any changes or reclassifications in the Consolidated Balance Sheets as of September 30, 2016. No prior periods were retrospectively adjusted.