NOTE - INCOME TAXES

 

Income tax expense (benefit) is comprised of the following for the years ended or

 

 

A reconciliation of the statutory federal income tax rate and the effective rate as a percentage of pretax income is as follows for the years ended or

 

 

The components of deferred income taxes at or are as follows:

 

The following table summarizes deferred income tax valuation allowances as of or

 

The effective income tax rate for the year ended increased from the year ended primarily as a result of an increase in state income taxes. During FY the effective rate was higher than in FY and FY as a result of the revaluation of deferred tax assets and liabilities to the lower enacted U.S. corporate tax rate of under the Tax Cuts and Jobs Act recognized during the year ended The revaluation of deferred tax assets and liabilities resulted in income tax expense of approximately recognized in consideration of the lower enacted rate for the year ended

 

The Company files income tax returns in the U.S. federal and various state taxing jurisdictions. With few exceptions, the Company is longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before FY The Company’s federal income tax returns have been examined for the years ended or and and the examinations did result in any changes to the income tax returns filed for these years.

 

Realization of the Company's deferred tax assets is dependent upon the Company generating sufficient taxable income, in the appropriate tax jurisdictions, in future years to obtain benefit from the reversal of net deductible temporary differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. Management believes that, with the exception of the deferred tax asset related to restructuring charges, it is more likely than that RMCF will realize the benefits of its deferred tax assets as of

 

The Company accounts for uncertainty in income taxes by recognizing the tax benefit from an uncertain tax position only if it is more likely than that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. As such, the Company is required to make judgments regarding income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and result in changes to the Company's judgments which can materially affect amounts recognized in the balance sheets and statements of operations. The result of the assessment of the Company's tax positions did have an impact on the consolidated financial statements for the years ended or or The Company does have any significant unrecognized tax benefits and does anticipate a significant increase or decrease in unrecognized tax benefits within the next months. Amounts are recognized for income tax related interest and penalties as a component of general and administrative expense in the statement of income and are immaterial for years ended or and

 

As of the Company foreclosed on the outstanding equity of U-Swirl and U-Swirl was consolidated for income tax purposes. SWRL, along with U-Swirl had historically filed its own consolidated federal income tax return and reported its own Federal net operating loss carry forward. As of SWRL had recorded a full valuation allowance related to the realization of its deferred income tax assets. As of a portion of the U-Swirl deferred tax assets were recognized as a result of it becoming more likely than that some of these assets would be realized in the future as a result of RMCF and U-Swirl filing a consolidated income tax return.

 

In accordance with Section of the Internal Revenue Code, deductibility of SWRL’s and U-Swirl’s Federal net operating loss carryovers be subject to annual limitation in the event of a change in control. The Company has performed a preliminary evaluation as to whether a change in control has taken place, and have concluded that there was a change of control with respect to the net operating losses of U-Swirl when the Company acquired its controlling ownership interest in and again in when the Company foreclosed on the stock of U-Swirl. The initial limitations will continue to limit deductibility of SWRL’s and U-Swirl’s net operating loss carryovers, but the annual loss limitation will be deductible to RMCF and U-Swirl International Inc. upon the filing of joint tax returns in FY and future years.

 

The Company estimates that the potential future tax deductions of U-Swirl’s Federal net operating losses, limited by section to be approximately with a resulting deferred tax asset of approximately U-Swirl’s Federal net operating loss carryovers will expire at various dates beginning in