Note 10. Income Taxes
Income tax expense for the year ended June 30 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
||
|
Current: |
|
|
|
|
|
|
|
|
Federal |
|
$ |
(35,227) |
|
$ |
(73,021) |
|
|
State |
|
|
(83,962) |
|
|
(72,879) |
|
|
Deferred: |
|
|
|
|
|
|
|
|
Federal |
|
|
(561,635) |
|
|
(344,906) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(680,824) |
|
$ |
(490,806) |
|
A reconciliation of the provision for income taxes computed at the statutory federal corporate tax rate of 34% to the income tax expense in the statements of income for the year ended June 30 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
||
|
Provision computed at the statutory federal tax rate |
|
$ |
(651,395) |
|
$ |
(525,492) |
|
|
State income taxes, net of federal tax |
|
|
(55,045) |
|
|
(48,100) |
|
|
Valuation allowance adjustment |
|
|
— |
|
|
79,000 |
|
|
Return-to-provision, net |
|
|
24,562 |
|
|
(32,837) |
|
|
Other |
|
|
1,054 |
|
|
36,623 |
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense |
|
$ |
(680,824) |
|
$ |
(490,806) |
|
Retained earnings at June 30, 2017 and 2016 include certain historical additions to bad debt reserves of approximately $2,132,000 for which no deferred federal income tax liability has been recorded. This amount represents an allocation of income to bad debt deductions for tax purposes alone. If, in the future, this portion of retained earnings is used for any purpose other than to absorb bad debt losses, federal taxes would be imposed at the then-applicable rates.
The net deferred tax asset at June 30 is as follows:
|
|
|
|
|
|
||
|
|
|
2017 |
|
2016 |
||
|
Gross deferred tax assets: |
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
1,208,020 |
|
$ |
1,001,980 |
|
Net operating loss carryover |
|
|
— |
|
|
530,899 |
|
General business credits |
|
|
324,364 |
|
|
324,364 |
|
Foreclosed asset writedowns |
|
|
50,592 |
|
|
50,592 |
|
Unrealized loss on securities |
|
|
6,393 |
|
|
— |
|
Other |
|
|
50,760 |
|
|
245,290 |
|
|
|
|
1,640,129 |
|
|
2,153,125 |
|
Gross deferred tax liabilities: |
|
|
|
|
|
|
|
Additions in excess of base year loan reserve |
|
|
(572,404) |
|
|
(585,334) |
|
Depreciation |
|
|
(73,623) |
|
|
(68,425) |
|
FHLB stock dividends |
|
|
(74,630) |
|
|
(77,656) |
|
Unrealized gain on securities |
|
|
— |
|
|
(2,100) |
|
Other |
|
|
(57,463) |
|
|
(3,517) |
|
|
|
|
(778,120) |
|
|
(737,032) |
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
862,009 |
|
$ |
1,416,093 |
No significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for unrecognized income tax benefits during the years ended June 30, 2017 and 2016. Corporate tax returns for the 2014 through 2016 years remain open to examination by taxing authorities.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in noninterest expenses. During the years ended June 30, 2017 and 2016, there were no interest and penalties recognized, nor were any balances for the payment of interest and penalties accrued at June 30, 2017 and 2016.