Taxes

EMCORE Corporation, incorporated in the state of New Jersey, incurred minimal or no income tax expense during the fiscal years ended September 30, 2011, 2010, and 2009. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory U.S. federal and state income tax rates to income before provision for income taxes is as follows:



Provision for Income Taxes (in thousands)	For the Fiscal Years Ended September 30,
	2011			2010			2009
Income tax benefit computed at U.S. federal statutory rate	$	(11.6	)	$	(8.1	)	$	(46.3	)
State tax benefits, net of U.S. federal effect	(1.1		)	(0.4		)	(4.5		)
Other	1.3			2.3			4.5
Valuation allowance	11.4			6.3			46.3
Income tax expense - current	$	—		$	0.1		$	—
Effective tax rate	—		%	—		%	—		%

Significant components of our deferred tax assets are as follows:



Deferred Tax Assets	As of September 30, 2011				As of September 30, 2010
(in thousands)	As of September 30, 2011				As of September 30, 2010
Deferred tax assets (liabilities):
Federal net operating loss carryforwards	$	144,732			$	139,539
Foreign net operating loss carryforwards	4,094				3,637
State research credit carryforwards	1,125				1,185
Inventory reserves	5,206				4,493
Accounts receivable reserves	1,248				1,254
Accrued warranty reserve	1,458				1,529
State net operating loss carryforwards	14,346				13,013
Investment write-down	5,315				5,285
Legal reserves	480				—
Stock compensation	2,369				1,226
Deferred compensation	1,667				893
Fixed assets and intangibles	19,700				20,156
Other	5,504				2,904
Total deferred tax assets	207,244				195,114
Valuation allowance	(207,244		)	)	(195,114		)
Net deferred tax assets	$	—			$	—

During the fiscal years ended September 30, 2011 and 2010, there were no material increases or decreases in unrecognized tax benefits and we do not anticipate any material increases or decreases in the amounts of unrecognized tax benefits over the next twelve months. For the fiscal years ended September 30, 2011, 2010, and 2009, we recorded income tax expense of approximately $56,000, $97,000, and $119,000, respectively. As of September 30, 2011 and 2010, we had approximately $198,000 and $185,000 of interest and penalties accrued as tax liabilities on our balance sheet.

As of September 30, 2011, we had net operating loss carryforwards for U.S. federal income tax purposes of approximately $425.7 million which begin to expire in 2021. As of September 30, 2011, we had foreign net operating loss carryforwards of $17.6 million which begin to expire in 2012 as well as, state net operating loss carryforwards of approximately $366.2 million which begin to expire in 2012. We also had U.S. research and development tax credits of approximately $1.1 million. The research credits are currently expiring including the next attribute expected to expire in 2012. Utilization of our net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations set forth in Internal Revenue Code Section 382 and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization.

A reconciliation of the beginning and ending amount of unrecognized gross tax benefits is as follows:



Unrecognized Gross Tax Benefit (in thousands)
Balance as of September 30, 2009	$	374
Adjustments based on tax positions related to the current year	(17		)
Adjustments based on tax positions of prior years	(19		)
Balance as of September 30, 2010	338
Adjustments based on tax positions related to the current year	—
Adjustments based on tax positions of prior years	—
Balance as of September 30, 2011	$	338

We file income tax returns in the U.S. federal, state, and local jurisdictions and, currently, no federal, state, and local income tax returns are under examination. The following tax years remain open to assessment for each of the more significant jurisdictions where we are subject to income taxes: after fiscal year 2007 for U.S. federal, after fiscal year 2006 for the state of California, and after fiscal year 2007 for the state of New Mexico.