Income Taxes

12 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

4. INCOME TAXES

The Company’s provision (benefit) for income taxes is detailed as follows:

	2022		2021			2020
Current:
Federal	$	2,522,000	$	315,050		$	(3,642,000	)
State		438,000		19,000			-
		2,960,000		334,050			(3,642,000	)
Deferred:
Federal		845,000		(824,000	)		(3,611,000	)
State		397,000		(161,101	)		(1,036,000	)
		1,242,000		(985,101	)		(4,647,000	)
	$	4,202,000	$	(651,051	)	$	(8,289,000	)

The difference between the provision (benefit) for income taxes and the amount which would result from the application of the federal statutory rate to income before provision (benefit) for income taxes is analyzed below for the years ended September 30:

	2022			2021			2020
Provision (benefit) for income taxes at statutory rate	$	5,168,366		$	(1,429,291	)	$	(6,765,705	)
Change in valuation allowance		(1,313,271	)		1,228,899			96,000
Percentage depletion		(602,490	)		(412,650	)		(258,300	)
State income taxes, net of federal provision (benefit)		863,042			(176,960	)		(939,310	)
Effect of NOL Carryback Rate		-			-			(610,803	)
Restricted stock tax benefit		59,000			76,000			58,000
Deferred directors' compensation benefit		64,000			54,000			79,000
Law change		(56,094	)		47,000			-
Other		19,447			(38,049	)		52,118
	$	4,202,000		$	(651,051	)	$	(8,289,000	)

Deferred tax assets and liabilities, resulting from differences between the financial statement carrying amounts and the tax basis of assets and liabilities, consist of the following at September 30:

	2022		2021
Deferred tax liabilities:
Financial basis in excess of tax basis, principally intangible    drilling costs capitalized for financial purposes and    expensed for tax purposes	$	5,121,376	$	4,090,017
Derivative contracts		-		-
Total deferred tax liabilities		5,121,376		4,090,017
Deferred tax assets:
State net operating loss carry forwards		14,737		238,439
Federal net operating loss carry forwards		-		-
Statutory depletion carryover		-		286,440
Asset retirement obligations		337,247		483,990
Deferred directors' compensation		331,395		390,683
Restricted stock expense		705,195		303,674
Derivative contracts		2,072,530		3,278,067
Other		88,095		91,717
Total deferred tax assets		3,549,199		5,073,010
Deferred tax asset valuation allowance		-		1,251,096
State NOL valuation allowance		13,729		75,803
Net deferred tax (assets) liabilities	$	1,585,906	$	343,906

Included in state net operating loss carry forwards at September 30, 2022, the Company had a deferred tax asset of $14,737 related to Arkansas state income tax net operating loss (“AR NOL”) carry-forwards, which begin to expire in 2023. The Company has a valuation allowance of $13,729 for the AR NOLs, as it is more likely than not that it will not be utilized before expiration.

The federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018-2020 Net Operating Losses (“NOLs”), removing the 80% limitation on the carryback of those NOLs, increasing the Section 163(j) 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerates refunds for minimum tax credit carryforwards, along with a few other provisions. On July 28, 2020, final regulations were issued under Section 163(j) which modified the calculation under the previous proposed regulations of adjusted taxable income for purposes of the 50% limitation on interest expense. Under the final regulations, depreciation, amortization, and depletion capitalizable under Section 263A is now added back to tentative taxable income. This change allows all interest expense to be deductible for 2020 and reduces the associated deferred tax asset to zero. In fiscal 2021, the Company received a tax refund associated with the AMT credits totaling $1.4 million, which was accelerated due to the CARES Act. In fiscal 2022, the Company received $2.2 million associated with the carryback of the 2020 federal net operating loss.