Income Taxes

9 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The calculation of the effective tax rate is as follows (in thousands):

	Three months ended June 30,						Nine months ended June 30,
	2022			2021			2022			2021
Income (loss) before income taxes	$	2,918		$	(1,338)		$	(774)		$	(2,767)
Income tax provision (benefit)	(6,143)			703			(5,772)			(138)
Net income (loss)	$	9,061		$	(2,041)		$	4,998		$	(2,629)
Effective tax rate	(211)		%	(53)		%	746		%	5		%

We record and maintain valuation allowances against the deferred tax assets of various foreign jurisdictions until sufficient evidence is available to demonstrate that it is more-likely-than-not that the net deferred tax assets will be recognized. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. During the period ended June 30, 2022, management determined that there is sufficient positive evidence to conclude that Canadian net deferred tax assets of $5.9 million are realizable. This determination was based on current and anticipated market conditions, continued market diversification, operating results over the past three years and anticipated future taxable income from our Canadian operations. The valuation allowance was released accordingly, and a $5.9 million tax benefit and corresponding increase in the deferred tax asset were recorded.

The tax benefit for the three and nine months ended June 30, 2022 was also impacted by a discrete item related to the gain recognized from the disposition of a small, non-core division of our Canadian operations. This gain on the disposal resulted in tax expense of $0.4 million.

For the three months ended June 30, 2021, we recorded an income tax provision due to our inability to recognize a tax benefit related to losses in the United Kingdom and the change in the estimated amounts of income (loss) recognized in the various tax jurisdictions. These items also reduced the tax benefit for the nine months ended June 30, 2021 that largely resulted from the estimated Research and Development Tax Credit (R&D Tax Credit) as well as the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance.