9. Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and in various states and foreign jurisdictions. With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal years before 2000.

The domestic and foreign components of income from continuing operations before income taxes are as follows (amounts in thousands):


	Fiscal Year Ended June 30,
	2020		2019

United States	$	7,151	$	750
Foreign		(152)		(160)
Income from operations	$	6,999	$	590

The components of the (benefit) provision for income taxes are as follows (amounts in thousands):


	Fiscal Year Ended June 30,
	2020		2019

Current:
Federal	$	—	$	(19)
State		651		34
Foreign		—		—
Total current	$	651	$	15

Deferred
Federal	$	(6,409)	$	6
State		(272)		19
Foreign		—		—
Total deferred	$	(6,681)	$	25
Total	$	(6,030)	$	40

A reconciliation of the income tax (benefit) expense computed using the federal statutory income tax rate to our (benefit) provision for income taxes is as follows:


	Fiscal Year Ended June 30,
	2020		2019
	(Amounts in thousands)

Provision at federal statutory rate	$	1,470	$	124
Change in valuation allowance		(8,738)		(1,709)
Permanent differences		1		3
Net operating loss expiration and adjustment		521		2,284
Change in state tax rates		291		(244)
Change in uncertain tax positions		131		6
Foreign rate differential		(15)		(16)
State and foreign tax expense		419		77
(Income) loss attributable to non-controlling interest		(178)		28
Other		68		(513)
(Benefit) provision for income taxes	$	(6,030)	$	40

Our deferred tax assets were comprised of the following:


	June 30,
	2020		2019
	(Amounts in thousands)

Deferred tax assets related to:
U. S. and foreign net operating loss carryforwards	$	14,388	$	16,017
Accrued compensation		1,222		1,262
Unrealized gain/loss on investments		1,751		1,828
Partnership investment		—		237
U. S. credit carryforwards		751		1,225
Stock compensation		919		190
Acquisition costs		62		75
Other		85		76
Deferred tax assets		19,178		20,910
Valuation allowance		(11,697)		(20,435)
Total deferred tax assets	$	7,481	$	475

Deferred tax liabilities related to:
Partnership investment	$	151	$	—
Bond interest accretion		698		—
Deferred tax liabilities		849		—
Total deferred tax liabilities	$	849	$	—

Deferred income taxes (net)	$	6,632	$	475

As of June 30, 2020, we had U.S. federal net operating losses ("NOLs") of approximately $51,438,000 for income tax purposes, of which none expire in fiscal year 2020, and the remainder expire at various dates through fiscal year 2037. We recently completed an evaluation of the potential effect of Section 382 of the Internal Revenue Code (the “IRC”) on our ability to utilize these NOLs. The study concluded that we have not had an ownership change for the period from July 22, 1993 to June 30, 2020. If we experience an ownership change as defined in Section 382 of the IRC, our ability to use these NOLs will be substantially limited, which could therefore significantly impair the value of that asset. See section below entitled “Tax Asset Preservation Plan” for details regarding steps we have taken to protect the value of our NOLs.

As of June 30, 2020, we had state NOLs of $22,856,000 and foreign NOLs of $8,258,000. The state NOLs expire according to the rules of each state and expiration will occur between fiscal year 2020 and fiscal year 2035. As of June 30, 2020, the foreign NOLs can be carried forward indefinitely, although some countries do restrict the amount of NOL that can be used in a given tax year.

We have evaluated our ability to generate future taxable income in all jurisdictions that would allow us to realize the benefit associated with these NOLs. Based on our best estimate of future taxable income, we do not expect to fully realize the benefit of these NOLs. We expect a significant amount of the U.S. NOLs to expire without utilization, resulting in a valuation allowance in the United States on this portion of the NOLs. We do not expect to realize the benefits of our NOLs in other international jurisdictions due to cumulative accounting losses, our long history of taxable losses, and our uncertainty with respect to generating future taxable income in the near term given our recently completed projections and other inherent uncertainties in our business. We continue to maintain a full valuation allowance on NOLs in these other international jurisdictions.

We have a research and development credit carryforward for federal purposes of $751,000, which has a carryforward period of 20 years, and which will expire in fiscal years 2023 through 2026. We do not expect that the Company will be able to realize the benefit of the research and development credit carryforwards expiring in fiscal years 2023 and 2024, so the Company maintains a valuation allowance on this portion of the research and development credit carryforwards. We also have a $950,000 federal Alternative Minimum Tax (“AMT”) credit carryforward which became refundable under the TCJA. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) allowed us to claim the remaining AMT credit as a refund during the fiscal year ended June 30, 2020. Of the $950,000 AMT credit carryforward from June 30, 2019, $475,000 had been received as of June 30, 2020, and the remainder was reported in other current assets on the accompanying consolidated balance sheet.

We have reassessed our intentions related to our indefinite reinvestment assertion as part of our provisional estimates. We no longer have the intent and ability to reinvest all undistributed earnings in the business of our wholly owned foreign subsidiary. As of June 30, 2020, our German subsidiary is our only remaining controlled foreign corporation. Germany holds an insignificant amount of cash that could be brought back to the U. S. Additionally, the German subsidiary is in a net accumulated deficit position. As a result, any remaining impact on income taxes – for example, state taxes, withholding taxes, or foreign exchange differences – would be immaterial.

The valuation allowance for deferred tax assets as of June 30, 2020 was $11,697,000, an $8,738,000 decrease from the June 30, 2019 balance of $20,435,000. This change consisted of a $8,689,000 decrease due to the release of a significant portion of the U. S. valuation allowance during the fiscal year ended June 30, 2020 and a $49,000 decrease due to the change in the balance of fully valued German deferred taxes.

Deferred Tax Assets and Related Valuation Allowances

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether or not a valuation allowance for tax assets is needed, we evaluate all available evidence, both positive and negative, including trends in operating income or losses, currently available information about future tax years, future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback tax years if carryback is permitted under the tax law, and tax planning strategies that would accelerate taxable amounts to utilize expiring carryforwards, change the character of taxable and deductible amounts from ordinary income or loss to capital gain or loss, or switch from tax-exempt to taxable investments. 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. As of June 30, 2020, we have released the valuation allowance on our U. S. deferred tax assets, with the exception of certain federal and state NOLs and credits expected to expire before usage. We continue to maintain a full valuation allowance on our German deferred tax asset.

Unrecognized tax benefits

A reconciliation of the beginning and ending amount of our unrecognized tax benefits for the fiscal years ended June 30, 2020 and 2019 is as follows (amounts in thousands):


Balance at July 1, 2018	$	251
Activity for year ended June 30, 2019		—
Balance at June 30, 2019		251
Increase related to tax positions - Current year		121
Balance at June 30, 2020	$	372

The amount of gross tax-effected unrecognized tax benefits as of June 30, 2020 was approximately $372,000, of which approximately $316,000, if recognized, would affect the effective tax rate. During the fiscal year ended June 30, 2020, we recognized approximately $10,000 of interest. We had approximately $43,000 and $33,000 of accrued interest at June 30, 2020 and 2019, respectively. We had no accrued penalties as of either June 30, 2020 or 2019. We recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. We believe that the amount of uncertainty in income taxes will not change by a significant amount within the next 12 months.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal years before 2000.

Tax Asset Preservation Plan

At our 2016 Annual Meeting of Stockholders held on October 26, 2016, our stockholders adopted a formal amendment to our certificate of incorporation (the “Protective Amendment”) to deter any person acquiring 4.9% or more of the outstanding common stock without the approval of our Board in order to protect the value of our NOLs. The Protective Amendment was extended by our stockholders at both our 2017 and 2018 Annual Meeting of Stockholders, and will expire on the earliest of (i) the Board of Directors’ determination that the Protective Amendment is no longer necessary for the preservation of the Company’s NOLs because of the amendment or repeal of Section 382 or any successor statute, (ii) the close of business on the first day of any taxable year of CCUR Holdings to which the Board of Directors determines that none of our NOLs may be carried forward, (iii) such date as the Board of Directors otherwise determines that the Protective Amendment is no longer necessary for the preservation of the Company’s NOLs, and (iv) the date of our Annual Meeting of Stockholders to be held during calendar year 2020.

As indicated in our Form 8‑K filed on May 11, 2018, the Company executed and delivered the Third Amended Consent and Limited Waiver to the Standstill Agreement, filed therewith as Exhibit 10.1 (the “Amended Consent and Limited Waiver”), to JDS1, LLC and Julian Singer (together with their affiliates and associates, the “Investor Group”). The Amended Consent and Limited Waiver provides that so long as (i) the Investor Group collectively beneficially own no more than 4,176,180 of the outstanding shares of common stock of the Company, including the Investor Group’s beneficial ownership of Common Stock as a result of the exercise or assignment of any option contracts, and (ii) any acquisition of common stock of the Company by the Investor Group would not reasonably be expected to limit the Company’s ability to utilize the Company’s NOLs, the Company shall not deem the Investor Group to have effected a Prohibited Transfer as that term is defined in the Company’s Restated Certificate of Incorporation.

CARES Act

On March 27, 2020, the CARES Act was signed into law. Key provisions of the CARES Act include one-time payments to individuals, strengthened unemployment insurance, additional health-care funding, loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code ("IRC"). The corporate income tax provisions of the CARES Act include allowing the carryback of NOLs generated in recent tax years, temporary removal of the 80% NOL usage limitation put in place under the TCJA, temporary favorable adjustments to the business interest expense limitation calculated under IRC Section 163(j), and the acceleration of refundable AMT credits.

We believe that the corporate income tax provisions of the CARES Act will not have a materially beneficial impact on the Company. Due to our history of losses , there is no potential for the carryback of NOLs. The temporary removal of the 80% income limitation on NOL usage has no impact, as we have substantial NOLs generated in years prior to the enactment of the TCJA not subject to this 80% limitation. We also do not have any interest expense disallowed under IRC Section 163(j) that would be impacted by the CARES Act. The only provision of note is the election to treat remaining AMT credits available as fully refundable as of the 2018 tax year. As of June 30, 2020, we have made use of this election in order to claim all remaining refundable AMT credits.