Provision for Income Taxes

12 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Provision for Income Taxes

Note 7. Provision for Income Taxes

The Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017. The legislation significantly changes U.S. tax law by, among other things, lowering the U.S. federal corporate tax rate, bonus depreciation that allows for full expensing of qualified property, and limiting the deductibility of interest expense and executive compensation. The Tax Act permanently reduces the U.S. corporate income tax rate to a flat 21% rate, effective January 1, 2018. Pursuant to Section 15 of the Internal Revenue Code, the Company applied a blended corporate tax rate of 28.1 percent for fiscal year 2018, which was based on the applicable tax rates before and after the Tax Reform Act and the number of days in the year.

The Company re-measured certain U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%, and provisionally recorded an increase to the provision for income taxes of $35,200 related to the re-measurement in the second quarter of fiscal year 2018. However, as of June 30, 2018 the impact from the Tax Act related to the re-measurement of the company’s deferred tax assets and liabilities was a $4,553 increase to the provision for income taxes. The year-end amount differed from the provisional amount booked in the second quarter due to variances in timing adjustments from those forecasted, mainly the accelerated expensing of property, plant and equipment placed in service in the third and fourth quarter.

A summary of the components of the provision for income taxes for the years ended June 30, 2018 and 2017 is as follows:

	2018			2017
Current tax expense - federal	$	880,213		$	559,171
Current tax (benefit) expense - state		(2,009	)		2,986
Deferred tax expense (benefit)		115,075			(46,488	)
Provision for income taxes	$	993,279		$	515,669

Deferred income taxes reflect the impact of "temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts measured by tax laws and regulations. These "temporary differences" are determined in accordance with ASC 740-10.

The combined U.S. federal and state effective income tax rates of 24.4% and 31.2%, for 2018 and 2017 respectively, differed from the statutory U.S. federal income tax rate for the following reasons:

	2018			2017
U.S. federal statutory income tax rate		28.1	%		34.0	%
Increase (reduction) in rate resulting from:
State franchise tax, net of federal income tax benefit		(0.1	)		0.1
ESOP cost versus Fair Market Value		1.1			3.6
Dividend on allocated ESOP shares		(2.9	)		(7.2	)
Qualified production activities		(2.1	)		(2.8	)
Stock-based compensation		0.1			1.8
Other		0.2			1.7
Effective tax rate		24.4	%		31.2	%

For the years ended June 30, 2018 and 2017 deferred income tax expense (benefit) of $115,075 and ($46,488), respectively, results from the changes in temporary differences for each year. The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of June 30, 2018 and 2017 are presented as follows:

	2018			2017
Deferred tax assets:
Accrued expenses	$	203,150		$	195,915
ESOP		32,875			73,696
Stock-based compensation		51,140			81,659
Inventory - effect of uniform capitalization		53,863			36,935
Unrealized loss (gain) on investment securities		1,060			666
Other		1,437			2,384
Total deferred tax assets	$	343,525		$	391,255
Deferred tax liability:
Property, plant and equipment - principally due
to differences in depreciation methods	$	361,218		$	294,267
Total deferred tax liability		361,218			294,267
Net deferred tax (liability) asset	$	(17,693	)	$	96,988

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projection for future taxable income over the period in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these temporary differences without consideration of a valuation allowance.

As the result of the implementation of the FASB interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109, the Company recognized no material adjustments to unrecognized tax benefits. As of June 30, 2018 and 2017, the Company has no unrecognized tax benefits.

The Company recognizes interest and penalties in general and administrative expense. As of June 30, 2018 and 2017, the Company has not recorded any provision for accrued interest and penalties.

By federal and state tax statue, federal and state tax returns are subject to audit for three years from date of filing, unless the return was audited within that period. As such, federal returns for tax years ending June 30, 2018, 2017, 2016, and 2015 remain open to examination by the IRS. State returns for tax years ending June 30, 2018, 2017, 2016 and 2015 remain open to examination by the State of New York.