INCOME TAXES Level 1 (Notes)

12 Months Ended

Jul. 31, 2022

INCOME TAXES [Abstract]

Income Taxes

INCOME TAXES

    The provision for income tax expense by fiscal year consists of the following (in thousands):

	2022		2021
Current
Federal	$	1,681	$	(683)
Foreign	16		2
State	696		309
Current Income Tax Total	2,393		(372)
Deferred
Federal	(1,868)		2,440
Foreign	(41)		(48)
State	(387)		368
Deferred Income Tax Total	(2,296)		2,760
Total Income Tax Expense	$	97	$	2,388

    Principal reasons for variations between the statutory federal rate and the effective rates by fiscal year were as follows:

	2022		2021
U.S. federal income tax rate	21.0	%	21.0	%
Depletion deductions allowed for mining	(20.1)		(5.4)
State income tax expense, net of federal tax expense	4.5		5.1
Nondeductible officer compensation	2.4		4.0
Tax credits	(3.1)		(2.5)
Statutory rate change of foreign subsidiaries	—		(0.7)
Valuation allowance - foreign	6.9		2.5
Foreign tax differential	(5.3)		(1.5)
Prior year income taxes	(9.5)		(4.0)
Goodwill impairment	3.1		—
Other	1.8		(0.8)
Effective income tax rate	1.7	%	17.7	%

The U.S. effective tax rate for the year ended July 31, 2022 and July 31, 2021 were 1.7% and 17.7%, respectively, based on income before taxes. The items impacting the effective tax rate were permanent items and the return to provision adjustments. The tax impact of the items comprising the permanent adjustments primarily consisted of depletion, stock-based compensation and goodwill impairment.

    The Consolidated Balance Sheets included the following tax effects of cumulative temporary differences as of July 31 (in thousands):

`

	2022				2021
	Assets		Liabilities		Assets		Liabilities
Depreciation	$	—	$	4,356	$	—	$	5,870
Deferred compensation	1,499		—		1,593		—
Postretirement benefits	209		—		1,296		—
Goodwill	62		—		—		1,073
Lease right of use assets	—		2,700		—		2,160
Lease liabilities	3,040		—		2,524		—
Allowance for doubtful accounts	95		—		176		—
Deferred marketing expenses	—		22		—		133
Other assets	1		—		289		—
Other liabilities	—		23		—		—
Accrued expenses	2,362		—		2,402		—
Tax credits	223		—		87		—
Amortization	1,046		—		1,028		—
Inventories	366		—		351		—
Depletion	—		154		—		166
Stock-based compensation	1,522		—		1,340		—
Reclamation	549		—		498		—
Other liabilities - foreign	—		42		—		86
Other assets – foreign	1,761		—		1,362		—
Valuation allowance	(1,761)		—		(1,362)		—
Total deferred taxes	$	10,974	$	7,297	$	11,584	$	9,488

    Deferred tax liabilities for depreciation decreased due to the election out of bonus depreciation that the Company took in fiscal year 2021. Deferred tax assets for post retirement benefits were affected by the freeze of our pension plan as well as the Lump Sum Option both of which significantly reduced our pension liability. See Note 8 of the Notes to the Consolidated Financial Statements for further information about postretirement benefits. Deferred tax assets and liabilities related to lease decreased as leases are expiring. Deferred tax assets for accrued expenses reflected a lower accrual for the annual discretionary bonus.

We recorded a valuation allowance of $1,761,000 and $1,362,000 as of July 31, 2022 and 2021, respectively, for the amount of the deferred tax benefit related to our foreign net operating loss carryforwards since we believe it is unlikely we will realize the benefit of these tax attributes in the future. As of July 31, 2022, we have total net operating loss carryforwards from state jurisdictions of approximately $7,000,000. The carryforward expiration dates vary by state. No valuation allowance has been established for these carryforwards since we expect our future profitability will allow us to fully realize these tax benefits.

With the exception of our foreign subsidiary in Canada, none of our foreign subsidiaries have generated any untaxed foreign income, therefore we have not provided for any related income taxes for these subsidiaries.

We had no material liability for unrecognized tax benefits based on tax positions related to the current and prior fiscal years as of July 31, 2022 and 2021; correspondingly, no related interest and penalties were recognized as income tax expense and there were no accruals for such items in either of these fiscal years.

We are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. We have no income tax returns under examination as of July 31, 2022 and federal tax returns for fiscal years 2019-2021 remain open for examination. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to five years. The state impact of any federal income tax changes remains subject to examination by various states for a period of up to one year after formal notification to the states. There are a limited number of open state and local income tax audits in which no material

issues have been preliminarily identified. There are no material open or unsettled foreign income tax audits. We believe our accrual for tax liabilities is adequate for all open audit years.