Note 16 - Income Tax

9 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

16.  INCOME TAX

The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. The statute of limitations, in general, is open for years 2016 to 2022 for tax authorities in those jurisdictions to audit or examine income tax returns. The Company is under annual review by the tax authorities of the respective jurisdiction to which the subsidiaries belong.

Due to the enactment of the Tax Act, the Company is subject to a tax on global intangible low-taxed income (“GILTI”).  GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. The Company has elected to account for GILTI as a period cost. GILTI expense was $Nil and $83 for three and nine months ended March 31, 2023, as compared to $Nil for the same period in fiscal 2022.

The Company's income tax expense was $8 and $474 for three and nine months ended March 31, 2023, as compared to $170 and $503 for the same period in Fiscal 2022. Our effective tax rate (“ETR”) from continuing operations was 14% and 500% for the quarters ended March 31, 2023 and March 31, 2022, respectively. The decrease in income tax expense and effective tax rate was due to the following:

1. A $81 reduction relating to GILTI tax provisions pursuant to final tax filings for Fiscal 2022.

2. Tax expense for three months ending March 31, 2022 included additional tax arising from tax assessments of prior periods.

The Company accrues penalties and interest related to unrecognized tax benefits when necessary, as a component of penalties and interest expense, respectively. The Company had no unrecognized tax benefits or related accrued penalties or interest expense at March 31, 2023.

In assessing the ability to realize the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not 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 on these criteria, management believes it is more likely than not the Company will not realize the benefits of the federal, state, and foreign deductible differences. Accordingly, a valuation allowance has been established against deferred tax assets recorded in the U.S. and various foreign jurisdictions.