Income Taxes

12 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

4. INCOME TAXES

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

	2021			2020			2019
Current:
Federal	$	315,050		$	(3,642,000	)	$	(1,388,000	)
State		19,000			-			19,000
		334,050			(3,642,000	)		(1,369,000	)
Deferred:
Federal		(824,000	)		(3,611,000	)		(9,763,000	)
State		(161,101	)		(1,036,000	)		(2,349,000	)
		(985,101	)		(4,647,000	)		(12,112,000	)
	$	(651,051	)	$	(8,289,000	)	$	(13,481,000	)

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:

	2021			2020			2019
Provision (benefit) for income taxes at statutory rate	$	(1,429,291	)	$	(6,765,705	)	$	(11,387,447	)
Change in valuation allowance		1,228,899			96,000			-
Percentage depletion		(412,650	)		(258,300	)		(431,340	)
State income taxes, net of federal provision (benefit)		(176,960	)		(939,310	)		(1,986,850	)
Effect of NOL Carryback Rate		-			(610,803	)		-
Restricted stock tax benefit		76,000			58,000			185,000
Deferred directors’ compensation benefit		54,000			79,000			(38,000	)
Law change		47,000			-			-
Other		(38,049	)		52,118			177,637
	$	(651,051	)	$	(8,289,000	)	$	(13,481,000	)

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:

	2021		2020
Deferred tax liabilities:
Financial basis in excess of tax basis, principally intangible    drilling costs capitalized for financial purposes and    expensed for tax purposes	$	4,090,017	$	3,880,307
Derivative contracts		-		-
Total deferred tax liabilities		4,090,017		3,880,307
Deferred tax assets:
State net operating loss carry forwards		238,439		391,193
Federal net operating loss carry forwards		-		369,523
Statutory depletion carryover		286,440		346,414
Asset retirement obligations		483,990		499,708
Deferred directors' compensation		390,683		436,225
Restricted stock expense		303,674		220,301
Derivative contracts		3,278,067		176,963
Other		91,717		110,973
Total deferred tax assets		5,073,010		2,551,300
Deferred tax asset valuation allowance		1,251,096		-
State NOL valuation allowance		75,803		-
Net deferred tax (assets) liabilities	$	343,906	$	1,329,007

Included in state net operating loss carry forwards at September 30, 2021, the Company had a deferred tax asset of $127,656 related to Oklahoma state income tax net operating loss (“OK NOL”) carry forwards, which begin to expire in 2037. The Company had a deferred tax asset of $84,326 related to Arkansas state income tax net operating loss (“AR NOL”) carry forwards, which begin to expire in 2022. There is no valuation allowance for OK NOLs, as it is more likely than not that these will be utilized before expiration. The Company has a valuation allowance of $71,000 for the AR NOLs and $1,251,096 for state and federal deferred tax assets, as it is more likely than not that these 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. During the quarter ended March 31,2021, the Company received a tax refund associated with the AMT credits totaling $1.4 million, which was accelerated due to the CARES Act. Additionally, the Company has a $2.2 million receivable associated with the carryback of the 2020 federal net operating loss.