Note I - Income Taxes

9 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

I

. Income Taxes

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on

March 27, 2020

in the United States. The CARES Act and related notices include several significant provisions, including delaying certain payroll tax payments, mandatory transition tax payments under the Tax Cuts and Jobs Act (“TCJ Act”), and estimated income tax payments. We do

not

currently expect the CARES Act to have a material impact on our financial results, including on our annual estimated effective tax rate, or on our liquidity. We will continue to monitor and assess the impact the CARES Act, and similar legislation in other countries, with respect to what impact they

may

have on our business and financial results.

The effective tax rate for the

three

months ended

March 31, 2020

was a benefit of

6.0%

and the effective tax rate for the

nine

months ended

March 31, 2020

was a benefit of

3.7%.

The rates differ from the U.S. federal statutory rate of

21%

due to our net loss and permanent book to tax differences for the

three

and

nine

months ended

March 31, 2020.

We have recorded our tax benefit commensurate with the tax benefit we expect on an annual basis. The effective tax rate for the

three

months ended

March 31, 2019

was

18.9%

and the effective tax for the

nine

months ended

March 31, 2019

was

20.1%.

To determine our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions to which we are subject. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rate from quarter to quarter. We recognize interest and penalties related to uncertain tax positions, if any, as an income tax expense. As of

March 31, 2020,

and

June 30, 2019,

we had

not

recorded any liabilities for any uncertain tax positions. In the

three

months ended

March 31, 2020,

we recognized a discrete tax expense of

$74,000

related to employee restricted stock vesting. In the

nine

months ended

March 31, 2020,

we recognized a discrete tax expense of

$64,000

related to employee restricted stock vesting. There were

no

other significant discrete items for the

three

and

nine

months ended

March 31, 2020.

There were

no

significant discrete items for the

three

or

nine

months ended

March 31, 2019.  

We record valuation allowances to reduce our deferred tax assets to an amount we believe is more likely than

not

to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than

not

that some portion or all of the deferred tax assets will be realized. 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. During the

three

or

nine

months ended

March 31, 2020,

there was

no

change to our valuation allowance for our deferred tax assets.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates, for each of the jurisdictions in which we operate, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date for such new rates.

We are subject to taxation in the U.S., Switzerland and various state jurisdictions. Our tax years for the fiscal year ended

June 30,

2017

and forward are subject to examination by the U.S. tax authorities. Our tax years for the fiscal years ended

June 30,

2007

and forward are subject to examination by the state tax authorities. Our tax years for the fiscal year ended

June 30,

2018

and forward are subject to examination by the Swiss tax authorities.

It is our policy to establish reserves based on management’s assessment of exposure for certain positions taken in previously filed tax returns that

may

become payable upon audit by tax authorities. Our tax reserves are analyzed quarterly and adjustments are made as events occur that we believe warrant adjustments to those reserves. There were

no

adjustments to reserves in the

three

or

nine

month periods ended

March 31, 2020.