Income Taxes

3 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

I. INCOME TAXES

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

	Three months ended December 31,
	2015			2014
Loss before income taxes....................................	$	(1,506	)	$	(1,230	)
Income tax benefit.........................................		(1,047	)		(991	)
Net loss................................................	$	(459	)	$	(239	)
Effective tax rate..........................................		70	%		81	%

	Three months ended December 31,
	2015			2014
Statutory rate...............................................		35	%		35	%
Foreign valuation allowance.....................................		(11	)		—
Research and development credit.................................		45			46
State income taxes, net of federal benefit............................		3			2
Domestic production activities deduction............................		(2	)		(2	)
Effective rate...............................................		70	%		81	%

We recorded an income tax benefit of $1.0 million in the first quarter of Fiscal 2016 and Fiscal 2015.The effective tax rate for the first quarter of Fiscal 2016 was 70% compared to an effective tax rate of 81% in the first quarter of Fiscal 2015, primarily due to our inability to recognize a tax benefit on the Canadian loss incurred in the first quarter of Fiscal 2016. A tax benefit related to the Canadian loss was recognized in the first quarter of Fiscal 2015.

In the second quarter of Fiscal 2015, we recorded a valuation allowance against the Canadian net deferred assets. Due to the historical Canadian losses, and the projected losses in the near term, we were required under the more-likely-than-not accounting standard to record a valuation allowance against the Canadian net deferred assets because we anticipated that we may not be able to realize the benefits of the net operating loss carryforwards and other deductible differences.

On December 18, 2015, the “Protecting Americans from Tax Hikes Act of 2015” was enacted which retroactively reinstated and made permanent the Research and Development Tax Credit (R&D Tax Credit).  The retroactive tax benefit for the previously expired period from January 1, 2015 to September 30, 2015 of $0.8 million is reflected as a discrete item and had a favorable impact to our consolidated tax benefit for the first quarter of Fiscal 2016.  A retroactive reinstatement of the R&D Tax Credit resulting in a discrete item of $0.6 million was made in the first quarter of Fiscal 2015.