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Income Taxes
 12 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax expense for the fiscal years ended June 30, 2023 and 2022 consists of the following (in thousands):
Year ended June 30,
20232022
Income Before Income Taxes:
Domestic$2,464 $1,613 
International1,535 3,078 
$3,999 $4,691 
Current Taxes:
Federal$2,012 $255 
State436 237 
Foreign686 1,195 
Total Current Income Tax Provision$3,134 $1,687 
Deferred Taxes:
Federal$(1,400)$(391)
State(303)(43)
Foreign28 318 
Total Deferred Income Tax Provision$(1,675)$(116)
Net Income Tax Provision$1,459 $1,571 
The effective income tax rate for the fiscal years ended June 30, 2023 and 2022 differs from the U.S. Federal statutory income tax rate due to the following:
Year ended June 30,
20232022
Federal statutory income tax rate21.0 %21.0 %
State income taxes, net of federal benefit0.8 %0.1 %
Foreign tax rate difference8.3 %12.9 %
Tax return to provision true-up3.2 %(4.3)%
Limit on future stock compensation due to 162(m)4.3 %0.1 %
Foreign withholding tax0.4 %1.3 %
Other differences(0.3)%1.0 %
Revalue of deferred for change in federal tax rate0.1 %0.1 %
Permanent differences:
— stock-based compensation5.8 %3.9 %
— foreign derived intangible income deduction(5.8)%(6.5)%
— tax credits(5.3)%(16.0)%
— meals and entertainment0.8 %0.1 %
— removal of permanent reinvestment assertion in Japan0.3 %4.6 %
— other permanent differences2.1 %2.2 %
Change in valuation allowance0.7 %13.1 %
Net income tax provision 36.5 %33.5 %
The components of the deferred tax assets and liabilities as of June 30, 2023 and 2022 are as follows (in thousands):
June 30,
20232022
Deferred tax assets:
Federal, state, and foreign net operating loss carryovers$250 $292 
Stock option compensation549 232 
Section 174 costs955 — 
Lease liability3,100 3,388 
Accrued vacation, allowance for returns, bonuses & other3,005 2,780 
Gross deferred tax asset$7,859 $6,692 
Deferred tax liabilities:
Patents and trademarks$(66)$(78)
Property & equipment(1,571)(1,996)
Right of use asset(2,057)(2,245)
Other(470)(409)
Gross deferred tax liabilities(4,164)(4,728)
Less: valuation allowance(704)(675)
Deferred tax assets, net$2,991 $1,289 
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. 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.
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.
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 fiscal 2022, the Company made a check the box election for LifeVantage Asia to be taxed as a disregarded entity ("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. 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.
There were no unrecognized tax benefits and no changes to the liability for uncertain tax positions for the fiscal years ending June 30, 2023 and 2022.
The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2020 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2019 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.
The change in the valuation allowance were as follows (in thousands):
Years ended June 30,
20232022
Beginning balance$675 $73 
Increases29 602 
Ending balance$704 $675 
The change in valuation allowance during the fiscal year ended June 30, 2023 related to current year income in entities with a full valuation allowance along with a change to the United States valuation allowance based on updated projections and changes to the blended rate. During the fiscal year ended June 30, 2022, the Company placed a full valuation allowance on the deferred tax asset for the impairment on the GEG investment. The Company does not expect to recognize future capital gains to benefit the future tax capital loss.
As of June 30, 2023, 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, 2023, state NOLs were $6.1 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, 2023 and 2022, was $0.2 million and $0.2 million, 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, 2019 through June 30, 2023.