DAILY JOURNAL CORP Income Taxes Disclosure

Note 6.  Income Taxes

 

The provision from income taxes consists of the following (in thousands):

 

		2025				2024
Current:
Federal		$	2,337			$	3,000
State			878				1,053
Foreign			45				70
Total current expense			3,260				4,123
Deferred:
Federal			26,918				17,005
State			7,772				5,037
Foreign			-				-
Total deferred expense			34,690				22,042
Total income tax provision		$	37,950			$	26,165

 

          The difference between the statutory federal income tax rate and the Company’s effective rate is summarized below:

 

		2025				2024
Statutory federal income tax rate			21.0	%			21.0	%
State franchise taxes (net of federal tax benefit)			4.8				5.0
Effect of state rate change on beginning balance of deferred tax liabilities			(0.3	)			(0.4	)
Dividends received deduction			(0.3	)			(0.5	)
Others			0.1				—
Effective tax rate			25.3	%			25.1	%

 

The Company’s deferred income tax assets and liabilities (in thousands) were comprised of the following:

 

		2025				2024
Deferred tax assets attributable to:
Accrued liabilities, including supplemental compensation and vacation pay accrual		$	2,422			$	1,903
Impairment losses on marketable securities			(277	)			(280	)
Bad debt reserves not yet deductible			55				55
Depreciation and amortization			1,283				1,730
Deferred revenues			184				517
Goodwill			190				265
Net operating losses			160				166
Credits and other			—				103
Total deferred tax assets			4,017				4,459
Deferred tax liabilities attributable to:
Unrealized gains on marketable securities			(91,350	)			(57,100	)
Total deferred tax liabilities
Net deferred income taxes		$	(87,333	)		$	(52,641	)

 

During fiscal year 2025, the Company recorded an income tax provision of $38.0 million on pretax income of $150.1 million. The income tax provision consisted of tax expense of $34.3 million on unrealized gains on marketable securities, and $4.2 million on operating income, partially offset by a tax benefit of $0.5 million for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal year 2025 was 25.3%, after including the taxes on the unrealized gains on marketable securities.

 

 During fiscal year 2024, the Company recorded an income tax provision of $26.2 million on pretax income of $104.3 million.   The income tax provision consisted of tax expense of $24.5 million on the realized and unrealized gains on marketable securities, and $2.2 million on operating income, partially offset by a tax benefit of $0.5 million for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal year 2024 was 25.1%, after including the taxes on the realized and unrealized gains on marketable securities.

 

The Company files consolidated federal income tax returns, with its domestic subsidiary, in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal year 2021 with regard to federal income taxes and fiscal year 2020 for state income taxes.  The Canadian subsidiary files a federal and provincial tax return in Canada.

 

During fiscal year 2021, the Company utilized all of its federal and certain state net operating losses (NOL). During fiscal year 2024, the Company utilized the remaining $1.3 million of California NOLs. The Company also has NOLs in other states, expiring as follows:

 

Fiscal Year ended (in million)		Other State NOLs
September 30, 2029 through
September 30, 2036		$	0.2
September 30, 2037			0.1
September 30, 2038			0.2
September 30, 2039			0.1
No expiration			2
Total		$	2.6