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INCOME TAXES
 12 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of loss before income taxes are presented below:
20232022
Loss before income taxes:
U.S.$(121,245)$(338,565)
Non-U.S.(2,997)(13,884)
Total loss before income taxes$(124,242)$(352,449)
Significant components of our deferred tax assets and liabilities are as follows:
As of September 30,
20232022
Deferred tax assets:
Inventory$2,792 $1,461 
Allowance for credit losses1,487 1,288 
Accrued compensation and vacation515 2,574 
Domestic net operating loss carryforwards8,813 8,837 
Foreign net operating loss carryforwards11,302 8,276 
Foreign tax credit carryforwards2,811 769 
Unrealized foreign exchange400 1,191 
Capital loss carryforward1,693 — 
Stock compensation expense3,059 2,999 
Business Interest Limitation10,615 3,137 
Lease liabilities9,878 9,071 
Goodwill9,468 — 
Other356 608 
Total deferred tax assets63,189 40,211 
Deferred tax liabilities:
Prepaid expenses(643)(483)
Lease ROU assets(9,511)(8,941)
Accreted interest on convertible debt(7,170)(8,586)
Basis difference for property and equipment(12,689)(12,300)
Basis difference for intangible assets(66,865)(76,307)
Goodwill— (267)
Total deferred tax liabilities(96,878)(106,884)
Total net deferred tax liabilities(33,689)(66,673)
Valuation allowance for net deferred tax assets(16,375)(10,354)
Net deferred tax liabilities$(50,064)$(77,027)
Significant components of the benefit for income taxes were as follows for the years ended September 30, 2023 and 2022:
20232022
Current:
Federal$4,490 $61 
State and local967 496 
Foreign944 1,674 
Deferred:
Federal(20,560)(12,494)
State and local(4,807)(4,911)
Foreign(374)(13)
Income tax benefit$(19,340)$(15,187)
The effective income tax rate on continuing operations varied from the statutory federal income tax rate as follows:
Fiscal Years Ended September 30
20232022
Federal statutory income tax rate21.0 %21.0 %
Increases (decreases):
State and local income taxes, net of Federal tax benefit, if applicable3.3 %2.6 %
Loss on Fair Value Remeasurement of Embedded Derivative— %(2.9)%
Goodwill(3.5)%(16.4)%
Impact of foreign operations(0.3)%0.3 %
Sale of Israel(0.8)%— %
Other1.1 %(0.7)%
Valuation allowance changes(5.2)%0.4 %
Effective income tax rate15.6 %4.3 %
U.S. GAAP requires that valuation allowances should be established against deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. The Company assesses its deferred income taxes to determine if valuation allowances are required or should be adjusted. This assessment considers, among other matters, the nature, frequency and amount of recent losses, the duration of statutory carryforward periods, and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.
The Company’s U.S. tax reporting group has a cumulative three-year loss. The valuation allowance related to the Company’s U.S. tax reporting group as of September 30, 2023 and 2022 was $4,618 and $0, respectively, and the valuation allowance related to the Company's non-U.S. entities was $11,757 and $10,354, respectively, as the Company does not believe that certain deferred tax assets will be realized in the foreseeable future. Payments made in fiscal years 2023 and 2022 for income taxes, net of refunds, amounted to $7,146 and $479, respectively.
The Company’s non-U.S. subsidiaries’ cumulative undistributed earnings, projected as of September 30, 2023, are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or withholding taxes has been made in the accompanying consolidated financial statements. Further, a determination of the unrecognized deferred tax liability for the amount indefinitely reinvested is not practicable due to the complexities in the tax laws and assumptions we would have to make. As of November 5, 2021, with the acquisition of Envigo, the Company adopted an accounting policy regarding the treatment of taxes due on future inclusion of non-U.S. income in U.S. taxable income under the Global Intangible Low-Taxed Income provisions as a current period expense when incurred. Therefore, no deferred tax related to these provisions has been recorded as of September 30, 2023.
At September 30, 2023, the Company had domestic net operating loss carryforwards for federal tax purposes of $23,927, all of which may be carried forward indefinitely. State and local loss carryforwards totaled approximately $67,591. The majority expire from September 30, 2028 through 2042; however, approximately $21,911 may be carried forward
indefinitely, as they relate to states conforming to the provisions of the Tax Cuts and Jobs Act which allowed for an indefinite carryforward period of losses generated after December 31, 2017. The Company had non-U.S. net operating loss carryforwards of $44,412, which have been fully offset by valuation allowance. These losses may be carried forward indefinitely.
The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon regulatory examination based on the technical merits of the position. The amount of the benefit for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon ultimate settlement of the position. As of September 30, 2023, there were no material uncertain tax positions based on any federal or state tax position. In fiscal year 2022, the Company established an uncertain tax position of $1,861 in accordance with ASC 805-740 to directly offset acquired foreign net operating losses of $2,222 within the foreign net deferred tax liability. The position was settled during fiscal year 2023.
The Company is no longer subject to U.S. Federal tax examinations for years before 2018 or state and local 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 3 years from the date of utilization.