INCOME TAXES Level 1 (Notes)

12 Months Ended

Jul. 31, 2023

INCOME TAXES [Abstract]

Income Taxes

INCOME TAXES

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

	2023		2022
Current
Federal	$	7,503	$	1,681
Foreign	4		16
State	2,119		696
Current Income Tax Total	9,626		2,393
Deferred
Federal	(3,864)		(1,868)
Foreign	—		(41)
State	(567)		(387)
Deferred Income Tax Total	(4,431)		(2,296)
Total Income Tax Expense	$	5,195	$	97

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

	2023		2022
U.S. federal income tax rate	21.0	%	21.0	%
Depletion deductions allowed for mining	(7.7)		(20.1)
State income tax expense, net of federal tax expense	2.9		4.5
Nondeductible officer compensation	1.5		2.4
Tax credits	(0.3)		(3.1)
Valuation allowance - foreign	(0.2)		6.9
Foreign tax differential	(0.6)		(5.3)
Prior year income taxes	(1.3)		(9.5)
Goodwill impairment	—		3.1
Other	(0.3)		1.8
Effective income tax rate	15.0	%	1.7	%

The U.S. effective tax rate for the year ended July 31, 2023 and July 31, 2022 were 15.0% and 1.7%, respectively, based on income before taxes. The fiscal 2023 effective tax rate was lower than the statutory rate primarily due to favorable depletion deduction and a benefit from an anticipated federal tax return amendment. The fiscal 2023 effective tax rate was negatively impacted primarily due to nondeductible excess officers compensation. The fiscal 2022 effective tax rate benefited due to a favorable depletion deduction as well as federal tax return amendments. The fiscal 2022 effective tax rate was also negatively impacted primarily due to a nondeductible goodwill impairment as well as nondeductible officers compensation.

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

`

	2023				2022
	Assets		Liabilities		Assets		Liabilities
Depreciation	$	—	$	4,338	$	—	$	4,356
Deferred compensation	1,246		—		1,499		—
Capitalized R&D	269		—		—		—
Postretirement benefits	478		—		209		—
Goodwill	—		24		62		—
Lease right of use assets	—		2,412		—		2,700
Lease liabilities	2,747		—		3,040		—
Allowance for doubtful accounts	135		—		95		—
Deferred marketing expenses	—		11		—		22
Other assets	608		—		1		—
Other liabilities	—		301		—		23
Accrued expenses	5,303		—		2,362		—
Tax credits	301		—		223		—
Amortization	935		—		1,046		—
Inventories	203		—		366		—
Depletion	—		158		—		154
Stock-based compensation	1,634		—		1,522		—
Reclamation	627		—		549		—
Other liabilities - foreign	—		41		—		42
Other assets – foreign	1,698		—		1,761		—
Valuation allowance	(1,698)		—		(1,761)		—
Total deferred taxes	$	14,486	$	7,285	$	10,974	$	7,297

     Deferred tax assets for post retirement benefits were affected by the termination of our pension plan. 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 higher accrual for the annual discretionary bonus.

We recorded a valuation allowance of $1.7 million and $1.8 million as of July 31, 2023 and July 31, 2022, 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, 2023, we have total net operating loss carryforwards from state jurisdictions of approximately $3.4 million. 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 liabilities for unrecognized tax benefits based on tax positions related to the current and prior fiscal years as of July 31, 2023 and 2022; 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 are currently being audited by the Internal Revenue Service ("IRS") for Fiscal Year 2020. The 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.