Note 7 - Income Taxes

6 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

7

- Income Taxes

For the

six

months ended

March 31, 2020,

the Company recorded an income tax benefit of

$15,580,000

on a pretax loss of

$57,696,000.

   This was the net result of applying the effective tax rate anticipated for fiscal

2020

to the pretax loss, before the unrealized losses on investments, for the

six

months ended

March 31, 2020.  

The effective tax rate was more than the statutory rate primarily due to the dividends received deduction, which increased the taxable loss, and state tax benefits.   In addition, the Company recorded tax benefits of (i)

$187,000

resulting from the Coronavirus Aid, Relief and Economic Security (“CARES”) Act (see below) and (ii)

$15,425,000

for the unrealized losses on investments during the

six

months ended

March 31, 2020. 

The effective tax rate for the

six

months ended

March 31, 2020

was

27%,

after including the tax benefits from the CARES Act and the unrealized losses on investments.

The CARES Act, which was signed into law on

March 27, 2020,

contains

two

federal tax provisions beneficial to the Company.  One provision provides that net operating losses arising in tax years beginning in

2018,

that were previously only available to be carried forward, can now be carried back to the

five

previous years.  In addition, any alternative minimum tax credits carried forward from prior years can be claimed as a refund in years beginning in

2018.

  Consequently, the Company recorded a tax benefit resulting from carrying back a portion of the net operating loss generated in fiscal

2019

to fiscal

2014.

  The Company anticipates receiving a refund for all taxes and alternative minimum taxes paid in fiscal

2014.

  The resulting tax benefit from carrying back the net operating loss is primarily attributable to the difference in the federal tax rates of

34%

in fiscal

2014

and

21%

in fiscal

2019.

For the

six

months ended

March 31, 2019,

the Company recorded an income tax benefit of

$6,600,000

on a pretax loss of

$23,115,000.

   This was the net result of applying the effective tax rate anticipated for fiscal

2019

to the pretax loss for the

six

months ended

March 31, 2019.

The effective tax rate was greater than the statutory rate primarily due to state tax benefits. 

The Company’s effective tax rate was

27%

for the

six

months ended

March 31, 2020

as compared with

29%

in the prior year period. 

The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is

no

longer subject to examinations for fiscal years before fiscal

2016

with regard to federal income taxes and fiscal

2015

for state income taxes.