v3.22.2.2
INCOME TAXES
 12 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13 - INCOME TAXES

 

The provision for income tax (expense) benefit consists of the following:

 

For the years ended June 30,  2022   2021 
Federal          
Current tax expense  $-   $- 
Deferred tax (expense) benefit   (310,000)   1,606,000 
Federal income tax benefit   (310,000)   1,606,000 
State          
Current tax (expense)benefit   (1,000)   65,000 
Deferred tax benefit   169,000    475,000 
State and local income tax benefit   168,000    540,000 
Total income tax (expense) benefit  $(142,000)  $2,146,000 

 

A reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:

 

For the years ended June 30,  2022   2021 
         
Statutory federal tax rate   21.0%   21.0%
State income taxes, net of federal tax benefit   2.0%   5.8%
Non-taxable PPP loan   21.7%   - 
Provision to return adjustment   8.3%   2.9%
Valuation allowance   -236.7%   -4.3%
Deferral True-Up – Justice Basis Diff in FA   180.9%   - 
Other   0.6%   3.6%
Effective income tax rate reconciliation percentage   -2.2%   29.0%

 

The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2022 and 2021 are as follows:

 

   2022   2021 
Deferred tax assets          
Net operating loss carryforward  $10,925,000   $9,802,000 
Investment reserve   -    671,000 
Interest expense   2,231,000    2,684,000 
Accruals and reserves   587,000    - 
Depreciation   15,646,000    - 
Other   1,800,000    1,423,000 
Deferred tax assets before valuation allowance   31,189,000    14,580,000 
Less Valuation allowance   (22,775,000)   (951,000)
Deferred tax assets after valuation allowance   8,414,000    13,629,000 
           
Deferred tax liabilities          
Basis difference in Justice   -    (5,092,000)
State taxes   (503,000)   (482,000)
Deferred Tax Liabilities   (503,000)   (5,574,000)
Net deferred tax assets  $7,911,000   $8,055,000 

 

Management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets to determine if it is more likely than not that the deferred tax asset will be realized. As of June 30, 2022, it has been determined that it is more likely than not that the deferred tax asset will not be recognized with the exception of forecasted five-year projected income. Thus, there was a valuation allowance of $22,775,000 as of June 30, 2022. This was an increase of $21,824,000 from June 30, 2021.

 

As of June 30, 2022, the Company had net operating loss (“NOL”) carryforwards of approximately $35,011,000 and $40,416,000 for federal and state purposes, respectively. Of the $35,011,000 federal NOL’s carryforwards , $14,697,000 expire in varying amount through 2037 and $20,314,000 of post 2017 NOL’s can be carried forward indefinitely. Note that the post 2017 NOL’s may only offset 80% of future taxable income.

 

 

Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not” threshold based on the technical merits of the positions. As of June 30, 2022, it has been determined that there are no uncertain tax positions likely to impact the Company.

 

Utilization of the net operating loss carryover may be subject a substantial annual limitation if it should be determined that there has been a change in the ownership of more than 50 percent of the value of the Company’s stock, pursuant to Section 382 of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating loss carryovers before utilization.

 

The Company and the Partnership files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state and local jurisdictions, where applicable. Note that the Partnership was dissolved in 2021 and filed its required final tax returns as a result of the Company completing the acquisition of 100% of Justice Investors LP.

 

As of June 30, 2022, tax years beginning in fiscal years 2018 and 2017 remain open to examination by the major tax jurisdictions and are subject to the statute of limitations.