In Fiscal 2020, the Company implemented a non-qualified deferred compensation plan for certain senior-level management and executives. The non-qualified deferred compensation plan allows certain eligible employees to defer additional pre-tax earnings for retirement, beyond the IRS limits in place under the Plan. Contributions to the non-qualified deferred compensation plan during the three and nine months ended March 31, 2022 were not material.
Note 18. Income Taxes
The federal, state and local income tax benefit for the three months ended March 31, 2022 was $1.4 million compared to $2.5 million for the three months ended March 31, 2021. The effective tax rates for the three months ended March 31, 2022 and 2021 were 3.8% and 26.3%, respectively. The effective tax rate for the three months ended March 31, 2022 was lower compared to the three months ended March 31, 2021 primarily due to the valuation allowance recorded in Fiscal 2021.
The federal, state and local income tax benefit for the nine months ended March 31, 2022 was $2.8 million compared to $68.6 million for the nine months ended March 31, 2021. The effective tax rates for the nine months ended March 31, 2022 and 2021 were 2.0% and 27.0%, respectively. The effective tax rate for the nine months ended March 31, 2022 was lower compared to the nine months ended March 31, 2021 primarily due to the valuation allowance recorded in Fiscal 2021.
The Company may recognize the tax benefit from an uncertain tax position claimed on a tax return only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of March 31, 2022 and June 30, 2021, the Company has total unrecognized tax benefits of $4.5 million, of which $4.4 million would impact the Company’s effective tax rate for each period, if recognized. As a result of the positions taken during the period, the Company has not recorded any material interest and penalties for the period ended March 31, 2022 in the statement of operations and no cumulative interest and penalties have been recorded either in the Company’s statement of financial position as of March 31, 2022 and June 30, 2021. The Company will recognize interest accrued on unrecognized tax benefits in interest expense and any related penalties in operating expenses.
The Company files income tax returns in the United States federal jurisdiction and various states. The Company’s federal tax returns for Fiscal 2014 and prior generally are no longer subject to review as such years are closed. The Company’s Fiscal 2015 through 2017, 2019, and 2020 federal returns are currently under examination by the Internal Revenue Service (“IRS”). As part of a lengthy process, the Company has received various Information Document Requests (“IDRs”) and Notices of Proposed Adjustment (“NOPAs”) with respect to positions taken in certain income tax issues. We are in the process of assessing the impact of these notices and preparing a response to the IRS. We believe that it is more likely than not that our positions will ultimately be sustained upon further examination; however, an adverse outcome could have a material impact to the Company’s Consolidated Statements of Operations and financial position.
In October 2018, the Commonwealth of Pennsylvania initiated a routine field audit of the Company’s Fiscal 2016 and Fiscal 2017 corporate tax returns. In November 2021, the Company was notified that the State of Florida will conduct an audit of the Company’s Fiscal 2019 and 2020 corporate tax returns. In March 2022, the Company was notified that the Commonwealth of Pennsylvania and the State of Florida concluded their audits, which did not result in any assessments.
Note 19. Related Party Transactions
The Company had sales of $0.3 million and $0.6 million during the three months ended March 31, 2022 and 2021, respectively, to a generic distributor, Auburn Pharmaceutical Company (“Auburn”), which is a member of the Premier Buying Group. Sales to Auburn for the nine months ended March 31, 2022 and 2021 were $1.0 million and $2.1 million, respectively. Jeffrey Farber, a current board member, is the owner of Auburn. Accounts receivable includes amounts due from Auburn of $0.3 million and $0.4 million at March 31, 2022 and June 30, 2021, respectively.