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Income Taxes
 12 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax expense for the fiscal years ended June 30, 2022, 2021 and 2020 consists of the following (in thousands):
Year ended June 30,
202220212020
Income Before Income Taxes:
Domestic$1,613 $15,233 $12,817 
International3,078 1,999 1,844 
$4,691 $17,232 $14,661 
Current Taxes:
Federal$255 $2,146 $1,297 
State237 510 332 
Foreign1,195 730 1,113 
Total Current Income Tax Provision$1,687 $3,386 $2,742 
Deferred Taxes:
Federal$(391)$897 $316 
State(43)197 71 
Foreign318 (142)(17)
Total Deferred Income Tax Provision$(116)$952 $370 
Net Income Tax Provision$1,571 $4,338 $3,112 
The effective income tax rate for the fiscal years ended June 30, 2022, 2021 and 2020 differs from the U.S. Federal statutory income tax rate due to the following:
Year ended June 30,
202220212020
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit0.1 %3.6 %3.8 %
Foreign tax rate difference12.9 %2.1 %1.4 %
Tax return to provision true-up(4.3)%(0.7)%0.0 %
Limit on future stock compensation due to 162(m)0.1 %1.7 %2.3 %
Foreign withholding tax1.3 %0.4 %3.3 %
Other differences1.0 %1.5 %1.9 %
Revalue of deferred for change in federal tax rate0.1 %0.1 %(0.1)%
Permanent differences:
— stock based compensation3.9 %(2.3)%(13.6)%
— current year section 162(m) limitation0.0 %0.0 %1.6 %
— foreign derived intangible income deduction(6.5)%(0.6)%(0.5)%
— tax credits(16.0)%(1.4)%(2.3)%
— meals and entertainment0.1 %0.1 %0.4 %
— removal of permanent reinvestment assertion in Japan4.6 %0.0 %0.0 %
— other permanent differences2.2 %0.9 %1.8 %
Change in valuation allowance13.1 %(1.2)%0.2 %
Net income tax provision 33.5 %25.2 %21.2 %
The components of the deferred tax assets and liabilities as of June 30, 2022 and 2021 are as follows (in thousands):
June 30,
20222021
Deferred tax assets:
Federal, state, and foreign net operating loss carryovers$292 $271 
Stock option compensation232 444 
Accrued vacation, allowance for returns, bonuses & other3,923 2,104 
Gross deferred tax asset$4,447 $2,819 
Deferred tax liabilities:
Patents and trademarks$(78)$(99)
Property & equipment(1,996)(1,250)
Other(409)(189)
Gross deferred tax liabilities(2,483)(1,538)
Less: valuation allowance(675)(73)
Deferred tax assets, net$1,289 $1,208 
During fiscal 2022, the Company impaired its investment in GEG Corporation for book purposes. The Company performed an analysis and determined that for tax purposes the loss would be capital in nature, but that the tax event had not yet occurred. The Company recorded a deferred tax asset for the loss in the current year, but recorded a full valuation allowance against the deferred tax asset because the Company believes that when the tax event does occur, it will not be able to utilize the capital loss within the carryback or carryforward period. This valuation allowance is the main driving factor behind the Company's increased tax rate in fiscal 2022.
During fiscal 2022, the Company removed its permanent reinvestment assertion in Japan. As a result, the Company recorded provisions for withholding tax that it will pay to Japan and income taxes it will pay to various states when the cash is repatriated from Japan to Singapore. During the year, the Company made a check the box election for LifeVantage Asia to be
taxed as a DRE of the parent company, so dividends from Japan to Singapore are treated as received by the United States for USA income tax purposes. The Company also recorded an unborn foreign tax credit related to the 965(a) PTEP in Japan that will be given a partial FTC when the cash is repatriated. Japan also has E&P in the 965(b) PTEP basket, but is not allowed to take a foreign tax credit against that income. It also has E&P in the 951A basket. The Company has historically had little or no excess FTC limitation in the 951A basket and has therefore chosen not to record the unborn foreign tax credit related to that basket.
The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position. The measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. Currently, the Company has no material uncertain tax positions and does not expect significant changes within the next twelve months. Accordingly, the Company has not reserved for any corresponding interest or penalties.
In fiscal 2020, LifeVantage recorded an uncertain tax position related to withholding taxes in Taiwan. During fiscal 2021, the Company determined that this liability was owed, and moved it out of the UTP into taxes payable. In fiscal 2022, the Company made the payment. The Company applied for a reduced withholding rate with the Taiwan government and was advised by its tax service providers who assisted with the application to hold payment until after a decision was made on the application. Near the end of fiscal 2021, the Taiwan government approved the application, and accordingly, LifeVantage made the required payments in the beginning of fiscal 2022.
The beginning balance, ending balance, and changes to the liability for uncertain tax positions for the fiscal years ending June 30, 2021 and 2020 are as follows (in thousands):
June 30,
20222021
Unrecognized tax benefits, beginning of period$— $480 
Gross increases - tax positions in prior period— — 
Gross decreases - tax positions in prior period— (480)
Gross increases - tax positions in current period— — 
Settlement— — 
Lapse of statute of limitations— — 
Currency adjustment— — 
Unrecognized tax benefits, end of period$— $— 
The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2019 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2018 through present. In addition, the IRS and state tax authorities may examine net operating losses ("NOLs") for any previous years if utilized by the Company.
As of June 30, 2022, the Company had utilized all of its Federal NOL carry-forwards. The net operating losses were to expire by June 30, 2024 and are subject to review by the Internal Revenue Service, and are subject to U.S. Internal Revenue Code Section 382 limitations. As of June 30, 2022, state NOLs were $6.5 million and foreign NOLs were $0.3 million.
The total recognized tax benefit from settlement of stock based awards for the fiscal years ending June 30, 2022 and 2021, was $0.2 million and $8,000, respectively.
The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2018 through June 30, 2022.