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Note G - Income Taxes
 12 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
G
. Income Taxes
  
During fiscal
2020,
we recorded U.S.-based domestic tax benefit of
$821,000.
During fiscal
2019,
we recorded U.S.-based domestic tax expense of
$6,000.
 
The following is a geographical breakdown of (loss) income before income taxes (in thousands):
 
   
2020
    
2019
  
                 
United States
   $
(5,742
)
   $
927
  
Foreign
    
4,004
      
7,026
  
Total (loss) income before income taxes
   $
(1,738
)
   $
7,953
  
 
The provision for income taxes for the years ended
June 
30
consisted of the following (in thousands):
 
   
2020
    
2019
  
Current:
                
Federal
   $
31
     $
12
  
State
    
4
      
16
  
Foreign
    
728
      
1,172
  
     
763
      
1,200
  
Deferred:
                
Federal
    
(641
)
    
6
  
State
    
(215
)
    
(28
 )
Foreign
    
—
      
234
  
     
(856
)
    
212
  
Total (benefit) provision for income taxes
   $
(93
)
   $
1,412
  
 
Net deferred tax assets and deferred tax liabilities as of
June 
30
were as follows (in thousands):
 
   
20
20
    
2019
  
Deferred tax assets:
                
Inventory capitalization
   $
412
     $
507
  
Inventory reserves
    
301
      
273
  
Pension liability
    
260
      
159
  
Lease liability
    
2,732
      
—
  
Net operating loss carry forward
    
245
      
220
  
Deferred rent
    
—
      
130
  
Stock-based compensation
    
157
      
174
  
Forward Contracts
    
93
      
—
  
Tax credit carry forward
    
340
      
260
  
Allowance for bad debt
    
819
      
2
  
Other, net
    
246
      
91
  
Total gross deferred tax assets
    
5,605
      
1,816
  
                 
Deferred tax liabilities:
                
Withholding taxes
    
(1,133
)
    
(1,133
)
Fixed Assets
    
(1,011
)
    
(905
)
Foreign inventory reserves
    
(469
)
    
(469
)
Lease asset
    
(2,681
)
    
—
  
Forward Contracts
    
—
      
(229
)
Other, net
    
(115
)
    
(98
)
Deferred tax liabilities
    
(5,409
)
    
(2,834
)
Net deferred tax assets (liabilities)
   $
196
     $
(1,018
)
 
At
June 
30,
2020,
we had state tax net operating loss carry forwards of approximately
$3.4
million. Under California Assembly Bill
85,
effective
June 29, 2020,
net operating loss deductions were suspended for tax years beginning in
2019,
2020,
and
2021
and the carry forward periods of any net operating losses
not
utilized due to such suspension were extended. Our state tax loss carry forwards will begin to expire in fiscal
2032,
unless used before their expiration.
 
Pursuant to Section 
382
of the Internal Revenue Code of
1986,
as amended (the “Code”), the annual use of the net operating loss carry forwards and research and development tax credits could be limited by any greater than
50%
ownership change during any
three
-year testing period. We did
not
have any ownership changes that met this criterion during the fiscal years ended
June 
30,
2020
and
June 
30,
2019.
 
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, 2019 
and forward are subject to examination by the Swiss tax authorities.
 
NAIE's effective tax rate for Swiss federal, cantonal and communal taxes is approximately
18.2%.
 
As part of the Tax Cuts and Jobs Act of
2017
(the Tax Act), we were required to recognize a
one
-time deemed repatriation transition tax during the fiscal year ended
June 30, 2018
based on our total post-
1986
earnings and profits (E&P) from our Swiss subsidiary, NAIE. This accumulated E&P amount has historically been considered permanently reinvested thereby allowing us to defer recognizing any U.S. income tax on the amount. We
no
longer consider undistributed foreign earnings from NAIE as of
December 31, 2017
as indefinitely reinvested. We consider earnings accumulated subsequent to
December 31, 2017
as indefinitely reinvested.
 
A reconciliation of our income tax provision computed by applying the statutory federal income tax rate of
21%
for fiscal
2020
and for fiscal
2019
to net income before income taxes for the year ended
June 
30
is as follows (dollars in thousands):
 
   
20
20
    
2019
  
Income taxes computed at statutory federal income tax rate
   $
(364
)
   $
1,670
  
State income taxes, net of federal income tax expense
    
(174
)
    
(6
)
Permanent Differences
    
155
      
(187
)
Foreign tax rate differential
    
(112
)
    
(70
)
Global intangible low-taxed income (GILTI)
    
402
      
5
  
Income tax provision as reported
   $
(93
)
   $
1,412
  
Effective tax rate
    
5.4
%
    
17.8
%
 
The effective tax rate for the year ended
June 30, 2020
was
5.4%.
The effective tax rate for the year ended
June 30, 2020
differs from the estimated U.S. federal statutory rate of
21%
due primarily to the global intangible low-taxed income (GILTI) enacted as part of the Tax Act, and permanent differences, which primarily include discrete tax items related to employee stock vesting. In comparison, the effective tax rate for the year ended
June 30, 2019
was
17.8%.
The effective tax rate for the year ended
June 30, 2019
differs from the estimated U.S. federal statutory rate of
21%
due to permanent differences, which primarily includes research and development tax credits. We expect our U.S. federal statutory rate to be
21%
for fiscal years going forward.