Income and other Taxes

12 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

Income and other Taxes

Income and other Taxes

EMCORE Corporation is incorporated in the state of New Jersey. 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 Year Ended September 30,
	2013			2012			2011
Income tax expense (benefit) computed at U.S. federal statutory rate	$	1.7		$	(12.8	)	$	(11.6	)
State tax benefits, net of U.S. federal effect	0.4			(1.4		)	(1.1		)
Foreign	—			1.6			—
Other	1.3			0.7			1.3
Valuation allowance	(3.3		)	13.5			11.4
Income tax expense - current	$	0.1		$	1.6		$	—
Effective tax rate	2		%	4		%	—		%

Significant components of our deferred tax assets are as follows:

Deferred Tax Assets	As of September 30, 2013			As of September 30, 2012
(in thousands)
Deferred tax assets:
Federal net operating loss carryforwards	$	166,834		$	158,875
Foreign net operating loss carryforwards	4,052			3,593
Income tax credit carryforwards	2,641			2,773
Inventory reserves	3,743			5,891
Accounts receivable reserves	1,275			1,243
Accrued warranty reserve	799			1,053
State net operating loss carryforwards	14,289			15,984
Investment write-down	5,315			5,315
Legal reserves	—			267
Stock compensation	3,325			3,201
Deferred compensation	1,466			1,309
Fixed assets and intangibles	12,681			15,639
Other	1,320			7,199
Total deferred tax assets	217,740			222,342
Valuation allowance	(217,740		)	(222,342		)
Net deferred tax assets	$	—		$	—

During the fiscal years ended September 30, 2013 and 2012, 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, 2013, 2012 and 2011 we recorded income tax expense of approximately $120,000, $1,644,000 and $56,000, respectively. As of September 30,2013 and 2012, we had approximately $354,000 and $215,000, respectively, of interest and penalties accrued as tax liabilities on our balance sheet.

During the three months ended December 31, 2011, as part of an equity recapitalization at our former Suncore joint venture we received a deemed capital distribution of $14.8 million. The deemed capital distribution was subject to a 10% foreign withholding tax. As a result, we were subject to a $1.6 million foreign tax expense and Suncore made a cash dividend for an equal amount. The foreign tax expense was treated as a tax credit for U.S. tax purposes. See Note 17 - Suncore Joint Venture for additional disclosures related to this foreign income tax expense.

As of September 30, 2013, we had net operating loss carryforwards for U.S. federal income tax purposes of approximately $490.7 million which begin to expire in 2021. As of September 30, 2013, we had foreign net operating loss carryforwards of $18.5 million which began to expire in 2013, as well as, state net operating loss carryforwards of approximately $364.5 million which began to expire in 2013.  As of September 30, 2013, we also had tax credits (primarily foreign income and U.S. research and development tax credits) of approximately $2.6 million. The research credits are currently expiring including the next attribute expected to expire in 2013. 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, 2011	$	338
Adjustments based on tax positions related to the current year	—
Adjustments based on tax positions of prior years	282
Balance as of September 30, 2012	620
Adjustments based on tax positions related to the current year	—
Adjustments based on tax positions of prior years	—
Balance as of September 30, 2013	$	620

We file income tax returns in the U.S. federal, state, and local jurisdictions and, currently, no federal and local income tax returns are under examination. We are currently under examination by one state for the fiscal years 2009 through 2011. 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 2009 for U.S. federal, after fiscal year 2008 for the state of California, and after fiscal year 2009 for the state of New Mexico.

Included in our operating income for the fiscal year ended September 30, 2013 were $1.8 million of state incentive tax credits received. The amount received was allocated to cost of goods sold, selling, general and administrative and research and development expense primarily based on the number of employees allocated to the related departments. These credits will result in cash refunds and reduction of future payroll and compensation taxes. There were no significant incentive tax credits received during the fiscal years ended September 30, 2012 and 2011.