Note 12 - Income Taxes

12 Months Ended

Sep. 30, 2020

NOTE

12.

INCOME TAXES

The Company files a consolidated federal income tax return and certain combined state and local income tax returns with its subsidiaries. Income taxes consist of the following:

2020	Federal			State			Total
Current income tax expense	$	275,000		$	765,000		$	1,040,000
Deferred income tax benefit		(2,172,000	)		(733,000	)		(2,905,000	)
Total income tax expense	$	(1,897,000	)	$	32,000		$	(1,865,000	)

2019	Federal			State			Total
Current income tax expense	$	424,000		$	263,000		$	687,000
Deferred income tax expense (benefit)		(145,000	)		(223,000	)		(368,000	)
Total income tax expense	$	279,000		$	40,000		$	319,000

The income tax provision related to pre-tax income (loss) vary from the federal statutory rate as follows:

	Years Ended
	September 30,
	2020			2019
Statutory federal rate		21.0	%		(21.0	)%
State income taxes, net of federal income tax expense (benefit)		5.6	%		1.8	%
Permanent differences for tax purposes		(2.8	)%		9.2	%
Change in rate		(1.0	)%		9.7	%
Write-off of deferred tax asset attributable to change in ownership (see below)		—	%		67.7	%
Other		1.1	%		(3.6	)%
		23.9	%		63.8	%

Significant components of the Company's net deferred tax assets in the accompanying financial statements are as follows:

	September 30,
	2020			2019
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	2,672,000		$	2,967,000
Operating lease liabilities		4,699,000			—
Contingent consideration		1,185,000			441,000
Stock based compensation		1,744,000			1,481,000
Accrued expenses		575,000			1,499,000
Accounts receivable and other receivables		147,000			91,000
Federal AMT credit carryforward		—			260,000
Expenses associated with forgiveness of PPP loans		1,834,000			—
Fixed assets		(1,073,000	)		(510,000	)
Intangibles		(2,390,000	)		(448,000	)
Right-of-use assets		(4,137,000	)		—
Securities		(461,000	)		(1,221,000	)
Total deferred tax asset, net	$	4,795,000		$	4,560,000

September 30, 2020

, the Company had available federal net operating loss carryforwards of approximately

$11.9

million, which includes approximately

$4.6

million resulting from the National Tax acquisition, and state net operating loss carryforwards of approximately

$7.3

million that

may

be applied against future taxable income and expire at various dates between

2021

and

2039.

Due to the change in ownership discussed in Note

19,

the Company's deferred tax asset relating to the Company's net operating loss carry forwards will be subject to an annual limitation under Section

382

of the Internal Revenue Code, thereby reducing the amount of net operating loss carry forwards available to the Company to offset future taxable income. Such reduction in

2019

resulted in a write-off of deferred income tax assets of

$339,000.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

NATIONAL HOLDINGS CORP 10-K