Provision for Income Taxes

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Provision for Income Taxes

Note 8. Provision for Income Taxes

A summary of the components of the provision for income taxes for the years ended June 30, 2020 and 2019 is as follows:

	2020			2019
Current tax expense - federal	$	190,801		$	274,889
Current tax (benefit) expense - state		(1,158	)		6,010
Deferred tax (benefit) expense		(44,122	)		258,040
Provision for income taxes	$	145,521		$	538,939

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 11.1% and 18.7%, for 2020 and 2019 respectively, differed from the statutory U.S. federal income tax rate for the following reasons:

	2020			2019
U.S. federal statutory income tax rate		21.0	%		21.0	%
Increase (reduction) in rate resulting from:
State franchise tax, net of federal income tax benefit		(0.1	)		0.2
ESOP cost versus Fair Market Value		1.6			1.3
Dividend on allocated ESOP shares		(14.5	)		(3.0	)
Stock-based compensation		3.0			0.2
Foreign Derived Intangible Income Deduction		(0.2	)		(0.3	)
Other		0.3			(0.7	)
Effective tax rate		11.1	%		18.7	%

For the years ended June 30, 2020 and 2019 deferred income tax benefit and expense of $44,122 and $258,040, 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, 2020 and 2019 are presented as follows:

	2020			2019
Deferred tax assets:
Accrued expenses	$	171,880		$	164,388
ESOP		—			17,702
Stock-based compensation		56,280			56,382
Inventory - effect of uniform capitalization		74,352			64,148
Other		1,437			1,437
Total deferred tax assets	$	303,949		$	304,057
Deferred tax liability:
Property, plant and equipment - principally due
to differences in depreciation methods	$	503,009		$	541,150
Prepaid expenses		33,893			39,982
Total deferred tax liability	$	536,902		$	581,132
Net deferred tax liability	$	(232,953	)	$	(277,075	)

In assessing the realization 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, 2020 and 2019, the Company has no unrecognized tax benefits.

The Company recognizes interest and penalties in general and administrative expense. As of June 30, 2020 and 2019, the Company has not recorded any provision for accrued interest and penalties.

The Company is subject to taxation in the United States and various state jurisdictions. By Federal statute tax returns are subject to audit for three years from date of filing unless the return was audited within that period. In general the majority of state statues follow similar guidelines. As such, the Company’s tax returns for tax years ending June 30, 2020, 2019, 2018, and 2017 remain open to examination by the respective taxing authorities.