6.	Income Taxes

Components of Provision (Benefit) for Income Taxes

The domestic and foreign components of loss from continuing operations before the (benefit) provision for income taxes are as follows:

	Three Months Ended December 31,				Six Months Ended December 31,
	2017		2016		2017		2016

United States	$	(3,764)	$	(1,471)	$	(5,136)	$	(2,945)
Foreign		-		-		-		-
Loss from continuing operations	$	(3,764)	$	(1,471)	$	(5,136)	$	(2,945)

We recorded an income tax benefit of $924 and income tax expense of $14 during the three months ended December 31, 2017 and 2016, respectively and an income tax benefit of $918 and income tax expense $21 during the six months ended December 31, 2017 and 2016, respectively. The components of the (benefit) provision for income taxes are as follows:

	Three Months Ended December 31,				Six Months Ended December 31,
	2017		2016		2017		2016

United States	$	(924)	$	14	$	(918)	$	21
Foreign		-		-		-		-
(Benefit) provision for income taxes	$	(924)	$	14	$	(918)	$	21

For both the three and six months ended December 31, 2017, the domestic tax expense is lower than the prior year primarily due to the favorable impact of the Tax Cuts and Jobs Act (enacted on December 22, 2017) on the realizability of our alternative minimum tax credits and lower domestic income as compared to the same periods from the prior year.

Net Operating Losses

As of June 30, 2017, we had U.S. federal net operating loss carryforwards (“NOLs”) of approximately $71,953 for income tax purposes, of which none expire in fiscal year 2018, and the remainder expire at various dates through fiscal year 2036. As a result of the recognition of a taxable gain on the sale of our Content Delivery business on December 31, 2017, we utilized approximately $17,203 of our federal NOLs during the six months ended December 31, 2017. Our federal NOLs are projected to be approximately $55,686 as of June 30, 2018. With the enactment of the Tax Cuts and Jobs Act, U.S. federal NOLs generated in taxable years ending after December 31, 2017 will have an indefinite carryforward period.

In the first quarter of our fiscal 2018, we completed an evaluation of the potential effect of Section 382 of the Internal Revenue Code (the “IRC”) on our ability to utilize these net operating losses. The study concluded that we have not had an ownership change for the period from July 22, 1993 to June 30, 2017. 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.

We also have State NOLs that expire according to the rules of each state and expiration will occur between fiscal year 2018 and fiscal year 2036 and foreign NOLs that expire according to the rules of each country. Currently, none of the jurisdictions in which we have foreign NOLs are subject to expiration due to indefinite carryforward periods.

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 years; future reversals of existing taxable temporary differences; future taxable income exclusive of reversing temporary differences and carryforwards; taxable income in prior carryback 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 December 31, 2017, we maintain a full valuation allowance on our net deferred tax assets in all jurisdictions except the U.S.

United States:

The Tax Cut and Jobs Act was enacted on December 22, 2017. Under ASC 740, the impact of changes in tax law must be recorded in the financial statements in the reporting period that included the date of enactment. However, the SEC and the FASB both recognize that the magnitude of this law change will require extensive analysis and calculations to conform to the new provisions. The SEC issued Staff Accounting Bulletin (“SAB 118”) on December 22, 2017. SAB 118 provides registrants with guidance on when and how to report the impact of the law change when all necessary information is not available.

SAB 118 guidance provides that:

If analysis of the impact of the new law is completed by the time the financial statements are issued, then the impact should be included in the financial statements.

If only certain aspects of the new law are completed by the time the financial statements are issued but other aspects and other aspects are incomplete but able to be reasonably estimated, then the registrant should include both the certain aspects and a reasonable estimate of the incomplete aspects in its financial statements. This reasonable estimate should be reported as a “provisional amount” during a “measurement period” not to exceed one year from the date of the enactment of the new law.

If a registrant does not have the necessary information available, prepared, or analyzed for certain aspects of the Tax Cuts and Jobs Act to calculate a provisional amount, then no provisional amounts should be in its financial statements.

At December 31, 2017, consistent with the above processes, we evaluated the need for a valuation allowance against our deferred tax assets and determined that it was more likely than not that only our federal alternative minimum tax (“AMT”) tax credits of $1,138 would be realized. The AMT credit represents a provisional amount that will be finalized upon the filing of our federal income tax return for the year ended June 30, 2017. The filing of this return will occur prior to our fiscal year end which is within the measurement period. Under the Tax Cuts and Jobs Act, AMT tax credits will now become refundable in conjunction with the repeal of the corporate AMT. For tax years beginning after December 31, 2017 and before January 1, 2022, the AMT credit is refundable in an amount equal to 50% (100% for the 2021 tax year) of the excess of the credit for the tax year over the amount of the credit allowable for the year against regular tax liability. This results in the Company receiving its entire AMT credit of $1,138 as a refund no later than fiscal 2022 and as such a valuation allowance is no longer needed for the AMT credit carryforward. However, in accordance with ASC 740, we recognized a valuation allowance against all other net deferred tax asset items at December 31, 2017.

All Other Jurisdictions:

In all other jurisdictions, we do not have sufficient evidence of future income to conclude that it is more likely than not that we will realize our entire deferred tax inventory. Therefore, we have placed a full valuation allowance on the deferred tax inventory. These jurisdictions include the U.K., Germany, Spain, Hong Kong, and Australia. We re-evaluate our conclusions quarterly regarding the valuation allowance and we will make appropriate adjustments as necessary in the period in which significant changes occur.

Unrecognized Tax Benefits

We have evaluated our unrecognized tax benefits and determined that there has not been a material change in the amount of such benefits for the six months ended December 31, 2017.

Research and Development Tax Credits

During the year ended June 30, 2017, we applied for both a U.S. federal and state of Georgia research and development tax credit in the amounts of (1) $719 and $675 for our fiscal year ending June 30, 2016, respectively, and (2) $575 and $540 for our fiscal year ending June 30, 2017, respectively. For U.S. federal tax purposes, the credit cannot be utilized immediately but will carryforward for a period of 20 years. As we do not expect to be able to realize the benefit of the U.S. federal tax credit carryforward before its expiration, we maintain a full valuation allowance on this item. For the state of Georgia tax credit, we have recorded the credit within both other current assets and other long-term assets with an offset in both accrued expenses and other long-term liabilities in our condensed consolidated balance sheets as of December 31, 2017 and June 30, 2017. As future payroll tax withholdings of our Georgia-based employees become due, we are able to offset the withholding amount dollar-for-dollar against the credit. As a result, as the credit is claimed, we will (1) reduce other current assets and offset the payroll tax liability and (2) reduce accrued expenses and recognize a reduction of operating expenses.

During the three and six months ended December 31, 2017, we recognized $123 and $279, respectively, of the state of Georgia credit and reduced operating expenses accordingly. As of December 31, 2017, amounts due from the state of Georgia of $541 and $674 are reflected within other current assets and other long-term assets, respectively, and unrecogized income from these credits of $101 and $667 are reflected in accrued expenses and other long-term liabilities, respectively.

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 our 2017 Annual Meeting of Stockholders held on October 25, 2017 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 2018.

As indicated in our Form 8-K filed on October 27, 2017, the Company executed and delivered that certain Consent and Limited Waiver to the Standstill Agreement, filed therewith as Exhibit 10.1 (the “Consent and Limited Waiver”), to JDS1, LLC and Julian Singer (together with their affiliates and associates, the “Investor Group”). The Consent and Limited Waiver provides that so long as (i) the Investor Group collectively beneficially own no more than 24.9% of the outstanding shares of common stock of the Company and (ii) any acquisition of common stock of the Company by the Investor Group would not reasonably be expected to actually limit the Company’s ability to utilize the Company’s net operating loss carryforwards under applicable United States, state, or foreign tax laws, 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.