Note 3 - Income Taxes

12 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

3. INCOME TAXES

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

	2023		2022
Current:
Federal	$	1,275,000	$	2,688,000
State		49,000		1,208,000
		1,324,000		3,896,000
Deferred:
Federal		3,940,000		(23,200,000	)
State		1,386,000		(7,621,000	)
		5,326,000		(30,821,000	)
	$	6,650,000	$	(26,925,000	)

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

	2023			2022
Statutory federal income tax rate		21.0	%		21.0	%
State franchise taxes (net of federal tax benefit)		5.0			5.7
Effect of state rate change on beginning balance of deferred tax liabilities		(1.0	)		(0.7	)
Dividends received deduction		(1.6	)		0.4
Others		0.3			(0.1	)
Effective tax rate		23.7	%		26.3	%

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

	2023			2022
Deferred tax assets attributable to:
Accrued liabilities, including supplemental compensation and vacation pay accrual	$	1,990,000		$	1,792,000
Impairment losses on marketable securities		(306,000	)		(182,000	)
Bad debt reserves not yet deductible		55,000			56,000
Depreciation and amortization		2,206,000			2,686,000
Deferred revenues		1,068,000			1,316,000
Goodwill		370,000			451,000
Net operating losses		281,000			657,000
Credits and other		(3,000	)		71,000
Total deferred tax assets		5,661,000			6,847,000
Deferred tax liabilities attributable to:
Unrealized gains on marketable securities		(36,260,000	)		(32,120,000	)
Net deferred income taxes	$	(30,599,000	)	$	(25,273,000	)

During fiscal 2023, the Company recorded an income tax provision of $6,650,000 on pretax income of $28,102,000. The income tax provision consisted of tax provisions of $110,000 on the realized gains on marketable securities, $4,140,000 on the unrealized gain on marketable securities, and $2,803,000 on operating income, partially offset by a tax benefit of $403,000 for the dividends received deduction and other permanent differences. Consequently, the overall effective tax rate for fiscal 2023 was 23.7%, after including the taxes on the realized and unrealized gains on marketable securities.

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.

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 suspended the use of NOLs for fiscal years beginning in 2020 and 2021. During fiscal 2022, the Company utilized $4.2 million of $5.5 million California NOLs. The remaining $1.3 million of California NOLs expire in fiscal years 2038 and 2039. The Company also has NOLs in other states, expiring as follows:

Fiscal Year ended (in million)	California NOLs		Other State NOLs
September 30, 2029 through September 30, 2036	$	---	$	.2
September 30, 2037		---		.1
September 30, 2038		.9		.2
September 30, 2039		.4		.1
No expiration		---		2.0
Total	$	1.3	$	2.6