|12 Months Ended|
Jun. 30, 2020
|Income Tax Disclosure [Abstract]|
For the years ended June 30, 2020, and 2019, the Company did not record a provision for income taxes due to a full valuation allowance against our deferred tax assets.
Significant components of the Company’s deferred tax assets and deferred tax liabilities are shown below:
The income tax benefit of these tax attributes has not been recorded in these consolidated financial statements because of the uncertainty of their recovery. The Company’s effective income tax rate differs from the statutory income tax rate of 21% (2019 – 21%).
The differences arise from the following items:
The Company has no current income tax expense for the year ended June 30, 2020, as there was a taxable loss for this period. The components of the Company’s loss before income taxes for the year ended June 30, 2020 were allocated as to $5.2 million in the US and $4.0 million in Canada. As of June 30, 2020, the Company had combined US and Canadian net operating loss carry forwards of $47.8 million (2019 – $43.2 million). The U.S. federal NOL carryforwards consist of $10.5 million generated before July 1, 2018, which begin expiring in 2030, and $6.7 million that can be carried forward indefinitely, but are subject to the 80% taxable income limitation. The Canadian NOL carryforwards of $30.6 million begin expiring in 2030. In addition, the Company has non-refundable Canadian federal investment tax credits of $329,368 (2019 - $303,969) that expire between 2029 and 2040 and non-refundable British Columbia investment tax credits of $204,987 (2019 – $166,000) that expire between 2020 and 2030. The Company also has Canadian scientific research and development tax incentives of $2.2 million (2019 – $2.0 million) that do not expire.
We file U.S., U.S. state and Canadian income tax returns with varying statues of limitations. The tax years from 2010 to 2020 remain open to examination due to the carryover of unused NOL carryforwards and tax credits.
Internal Revenue Code (“IRC”) Section 382 and 383 places a limitation on the amount of taxable income that can be offset by NOL and credit carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL and credit carryforwards in excess of the IRC Section 382 and 383 limitation. The limitation in the federal and state NOL and research and development credit carryforwards reduce the deferred tax assets, which are further offset by a full valuation allowance. The limitation can result in the expiration of the NOLs and research and development credit carryforwards available. We have performed an IRC Section 382 and 383 analysis and determined there was an ownership change in 2013. The Company has not performed any section 382 and 383 analysis since 2013. An assessed change in ownership subsequent to 2013 could limit future use of NOL and research and development credit carryforwards.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef