. INCOME TAXES

United States and foreign (loss) income before income taxes and minority interest were as follows:

	2020			2019
United States	$	(29,332	)	$	7,059
Foreign		(14,408	)		7,448
	$	(43,740	)	$	14,507

The (benefit) provision for income taxes is comprised of the following:

	2020			2019
Currently payable:
Federal	$	(149	)	$	248
State		30			261
Foreign		4,022			(3,644	)
		3,903			(3,135	)
Deferred:
Federal		(5,673	)		920
State		(860	)		(7	)
Foreign		(1,539	)		5,933
		(8,072	)		6,846
	$	(4,169	)	$	3,711

The components of the net deferred tax asset as of

June 30

are summarized in the table below.

	2020		2019
Deferred tax assets:
Retirement plans and employee benefits	$	7,934	$	7,732
Foreign tax credit carryforwards		7,429		6,296
Federal tax credits		1,585		1,057
State net operating loss and other state credit carryforwards		1,696		1,269
Federal net operating loss		1,607		-
Inventory		205		757
Reserves		1,056		765
Foreign NOL carryforwards		555		775
Accruals		823		339
Right of use assets - operating leases		3,920		3,691
Disallowed interest		418		-
Disallowed PPP expenses		1,320		-
Other assets		832		656
		29,380		23,337
Deferred tax liabilities:
Property, plant and equipment		3,231		3,432
Intangibles		3,306		5,345
Long term operating lease obligations		3,855		3,617
Other liabilities		44		194
		10,436		12,588
Valuation allowance		-		-
Total net deferred tax assets	$	18,944	$	10,749

June 30, 2020

the Company has net operating loss carryforwards (“NOLs”) of approximately

$7,655

and

$23,132

for federal and state income tax purposes, respectively, which will expire at various dates from fiscal year

2023

–

2040.

Federal NOLs generated in fiscal

2020

$7,655

have an indefinite carryover period. The Company has federal and state tax credit carryforwards of approximately

$9,410

and

$975,

respectively, which will expire at various dates from fiscal

2026

–

2040.

The Company maintains valuation allowances when it is more likely than

not

that all or a portion of a deferred tax asset will

not

be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The Company has evaluated the likelihood of whether the net deferred tax assets would be realized and concluded that it is more likely than

not

that all of deferred tax assets would be realized. Management believes that it is more likely than

not

that the results of future operations will generate sufficient taxable income and foreign source income to realize all the deferred tax assets.

Following is a reconciliation of the applicable U.S. federal income taxes to the actual income taxes reflected in the statements of operations:

	2020			2019

U.S. federal income tax at 21%	$	(9,185	)	$	3,046
Increases (reductions) in tax resulting from:
Foreign tax items		236			281
State taxes		(716	)		209
Change in prior year estimate		(213	)		(50	)
Research and development tax credits		(412	)		(306	)
Goodwill impairment		4,814			-
Unrecognized tax benefits		9			158
Stock compensation		(93	)		(153	)
Rate changes		237			15
Deferred tax basis adjustments		(138	)		(111	)
Executive compensation		-			291
GILTI inclusion		1,220			284
FDII deduction		-			(74	)
Other, net		72			121
	$	(4,169	)	$	3,711

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the Internal Revenue Code. The Tax Act is generally applicable for tax years beginning after

December 31, 2017,

which is the Company's fiscal year

2018.

However, several provisions of the Tax Act have differing effective dates, meaning these provisions did

not

impact the Company's financial statements until fiscal year

2019.

The provisions impacting the Company's fiscal year

2019

financial statements include the global intangible low taxed income (“GILTI”) income and foreign-derived intangible income (“FDII”) deduction and limitations on the deductibility of executive compensation.

Executive Compensation Limitations:

The Tax Act substantially modifies the limitation on corporate deductibility of executive compensation under Section

162

(m) of the Code. Section

162

(m) limits the deduction for compensation paid by a publicly held corporation to certain of its executive employees to

$1,000

per year. The Tax Act has amended the definition of “covered employee” to correspond to the general SEC reporting requirements for named executive officers. These are the corporation's principal executive officer, principal financial officer, and the next

three

highest-paid executive officers. Most significantly, the Tax Act has eliminated the exemptions for commissions and performance-based compensation.

Global Intangible Low Taxed Income (“GILTI”):

The Tax Act changed the foreign source income calculations and related foreign tax credit amounts. The GILTI require

10%

domestic shareholders (US Shareholders) of controlled foreign corporations (CFC's) to include in gross income annually the U.S. Shareholders' pro rata share of GILTI for the year.

Foreign Derived Intangible Income (“FDII”):

The Tax Act provides companies with a new permanent deduction. An incentive for C corporations to generate revenue from serving foreign markets, the provision applies a preferential tax rate to eligible income. The new tax law assumes a fixed rate of return on a corporation's tangible assets. Any remaining income is deemed to be generated by intangible assets.

The Company has

not

provided additional U.S. income taxes on cumulative earnings of consolidated foreign subsidiaries that are considered to be reinvested indefinitely. The Company reaffirms its position that these earnings remain permanently invested, and has

plans to repatriate funds to the U.S. for the foreseeable future. These earnings relate to ongoing operations and were approximately

$1,729

and

$6,208

June 30, 2020

and

June 30, 2019,

respectively. Such earnings could become taxable upon the sale or liquidation of these foreign subsidiaries or upon dividend repatriation. The Company's intent is for such earnings to be reinvested by the subsidiaries or to be repatriated only when it would be tax effective through the utilization of foreign tax credits.

Annually, the company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination are

2016

through

2020

for our major operations in Italy, Belgium and Japan. The tax years open to examination in the U.S. are for years subsequent to fiscal

2016

The Company has approximately

$918

and

$938

of unrecognized tax benefits as of

June 30, 2020

and

June 30, 2019,

respectively, which, if recognized would impact the effective tax rate. During the fiscal year the amount of unrecognized tax benefits decreased primarily due to statute of limitations that expired. During the next

twelve

months, the Company anticipates closure of the Wisconsin income tax audit for the periods fiscal year

2010

through fiscal year

2013.

This could result in a significant change to the unrecognized tax benefits. The Company's policy is to accrue interest and penalties related to unrecognized tax benefits in income tax expense.

Below is a reconciliation of beginning and ending amount of unrecognized tax benefits as of

June 30:

	2020			2019
Unrecognized tax benefits, beginning of year	$	938		$	816
Additions based on tax positions related to the prior year		17			31
Additions based on tax positions related to the current year		87			91
Reductions based on tax positions related to the prior year		(19	)		-
Subtractions due to statutes closing		(105	)		-
Unrecognized tax benefits, end of year	$	918		$	938

Substantially all of the Company's unrecognized tax benefits as of

June 30,

3020,

if recognized, would affect the effective tax rate. As of

June 30, 2020

and

2019,

the amounts accrued for interest and penalties totaled

$185

and

$148,

respectively, and are

not

included in the reconciliation above.