Note 3 - Income Taxes

12 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

3. INCOME TAXES

The (benefit) provision from income taxes consists of the following:

	2022			2021
Current:
Federal	$	2,688,000		$	5,420,000
State		1,208,000			2,835,000
		3,896,000			8,255,000
Deferred:
Federal		(23,200,000	)		24,385,000
State		(7,621,000	)		7,510,000
		(30,821,000	)		31,895,000
	$	(26,925,000	)	$	40,150,000

The difference between the statutory federal income tax rate and the Company’s effective rate is summarized below:

	2022			2021
Statutory federal income tax rate		21.0	%		21.0	%
State franchise taxes (net of federal tax benefit)		5.7			5.2
Effect of state rate change on beginning balance of deferred tax liabilities		(0.7	)		0.1
Dividends received deduction		0.4			(0.2	)
Others		(0.1	)		0.1
Effective tax rate		26.3	%		26.2	%

The Company’s deferred income tax assets and liabilities were comprised of the following:

	2022			2021
Deferred tax assets attributable to:
Accrued liabilities, including supplemental compensation and vacation pay accrual	$	1,792,000		$	1,603,000
Impairment losses on marketable securities		(182,000	)		113,000
Bad debt reserves not yet deductible		56,000			55,000
Depreciation and amortization		2,686,000			3,065,000
Deferred revenues		1,316,000			1,836,000
Goodwill		451,000			520,000
Net operating losses		657,000			561,000
Credits and other		71,000			268,000
Total deferred tax assets		6,847,000			8,021,000
Deferred tax liabilities attributable to:
Unrealized gains on marketable securities		(32,120,000	)		(64,115,000	)
Net deferred income taxes	$	(25,273,000	)	$	(56,094,000	)

During fiscal 2022, the Company recorded an income tax benefit of $26,925,000 on the pretax loss of $102,549,000.   The income tax benefit consisted of a tax benefit of $32,840,000 on the unrealized losses on marketable securities and a benefit of $340,000 for the dividends received deduction and other permanent book and tax differences, offset by tax provisions of $3,790,000 on the realized gains on marketable securities, $1,735,000 on income from operations, and $730,000 for the effect of a change in state apportionment on the beginning of the year’s deferred tax liability.  Consequently, the overall effective tax rate for fiscal 2022 was 26.3%, after including the taxes on the realized gains and unrealized losses on marketable securities.

For fiscal 2021, the Company recorded a provision for income taxes of $40,150,000 on pretax income of $153,050,000.   The effective rate of 26.2% was higher than the statutory rate of 21% primarily due to the recording of (i) state taxes, which were offset by the dividends received deduction, resulting in a tax provision of $1,260,000 on pretax income before the unrealized and realized gains on marketable securities, (ii) a tax provision of $27,938,000 on the unrealized gains on marketable securities and (iii) a tax provision of $10,952,000 on the realized gains on marketable securities.  

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 2019 with regard to federal income taxes and fiscal 2018 for state income taxes. 

* * * * * * * * * * * *

During fiscal 2021, the Company utilized all of its federal and certain state net operating losses (NOL). California has suspended the use of NOLs for fiscal years beginning in 2020, 2021 and 2022. As a result, the Company has $5.5 million of California NOLs expiring in fiscal years 2038 and 2039. The Company also has NOLs in other states, expiring as follows:

Fiscal Year ended	California NOLs		Other State NOLs
September 30, 2032	$	---	$	.1
September 30, 2037		---		.1
September 30, 2038		4.8		.2
September 30, 2039		.7		.1
No expiration		---		2.1
Total	$	5.5	$	2.6