INCOME TAXES

9 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

13.    INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company

recognizes the effect on deferred tax assets and liabilities of a change in tax rates in income in the period that includes the enactment date. The Company records valuation allowances based on a determination of the expected realization of tax assets.

The Company’s effective tax rates for the three months ended June 30, 2023 and 2022 were 118.1% and (10.6)%, respectively. For the three months ended June 30, 2023, the Company’s effective tax rate was primarily driven by a change in the Company's forecasted loss before income taxes, resulting in a catch up adjustment. For the three months ended June 30, 2022, the Company’s effective tax rate was driven by an increase in unfavorable permanent items and discrete adjustments.

The Company’s effective tax rates for the nine months ended June 30, 2023 and 2022 were 17.8% and 5.6%, respectively. For the nine months ended June 30, 2023, the Company’s effective tax rate was primarily related to the impact of non-deductible goodwill impairment and other discrete adjustments. For the nine months ended June 30, 2022, the Company’s effective tax rate was primarily related to a release of valuation allowance due to deferred tax liabilities established as part of the acquisition of Envigo, as well as the impact of certain book to tax differences on the deductibility of transaction costs, loss on fair value remeasurement of the embedded derivative component of the convertible notes, and other permanent items.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The Company measures the amount of the accrual for which an exposure exists as the largest amount of benefit determined on a cumulative probability basis that it believes is more likely than not to be realized upon settlement of the position. The Company settled the previously reported uncertain tax position derived from the acquisition of Envigo with a taxing authority during the nine months ended June 30, 2023, with no impact on consolidated net loss. As of June 30, 2023, the Company had no material liability for uncertain tax positions.

The Company records interest and penalties accrued in relation to the uncertain income tax position as a component of income tax expense (benefit). Any changes in the liability for the uncertain tax position would impact the effective tax rate. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

The Company is subject to income taxes in the U.S. federal jurisdiction, and the various states and foreign jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the normal course of business, the Company is subject to examination by federal, state, local and foreign taxing authorities. State and other income tax returns are generally subject to examination for a period of three to five years after the filing of the respective returns. The Company is no longer subject to U.S. federal tax examinations for years before 2018 or state and local tax examinations for years before 2017, with limited exceptions. For federal purposes, the tax attributes carried forward could be adjusted through the examination process and are subject to examination three years from the date of utilization.