Income and Other Taxes

6 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income and Other Taxes

Income and Other Taxes

During the three months ended March 31, 2021 and 2020, the Company recorded income tax (expense) benefit of approximately $(82,000) and $55,000, respectively. Income tax expense for the three months ended March 31, 2021 and 2020 is composed primarily of state tax expense. The increase in income tax expense is driven by the State of California's temporary suspension of net operating loss ("NOL") utilization.

During the six months ended March 31, 2021 and 2020, the Company recorded income tax (expense) benefit of approximately $(208,000) and $41,000, respectively. Income tax expense for the six months ended March 31, 2021 and 2020 is composed primarily of state tax expense. The increase in income tax expense is driven by the State of California’s temporary suspension of NOL utilization.

For the three months ended March 31, 2021 and 2020 the effective tax rate on continuing operations was 1.9% and 0.2%, respectively. The higher tax rate for the three months ended March 31, 2021 is primarily driven by the State of California's temporary suspension of NOL utilization.

For the six months ended March 31, 2021 and 2020, the effective tax rate on continuing operations was 2.9% and 0.1%, respectively. The increased tax rate for the six months ended March 31, 2021 is primarily driven by the State of California’s temporary suspension of NOL utilization.

The Company uses estimates to forecast the results from continuing operations for the current fiscal year as well as permanent differences between book and tax accounting.

We have not provided for income taxes on non-U.S. subsidiaries’ undistributed earnings as of March 31, 2021 because we plan to indefinitely reinvest the unremitted earnings of our non-U.S. subsidiaries and all of our non-U.S. subsidiaries historically have negative earnings and profits.

All deferred tax assets have a full valuation allowance at March 31, 2021. On a quarterly basis, the Company evaluates the positive and negative evidence to assess whether the more likely than not criteria has been satisfied in determining whether there will be further adjustments to the valuation allowance.

During the three and six months ended March 31, 2021 and 2020, there were no material increases or decreases in unrecognized tax benefits. As of March 31, 2021 and September 30, 2020, we had approximately $0.6 million of interest and penalties and $0.4 million of uncertain tax benefit reserved and accrued for as tax liabilities on our balance sheet. We expect that $1.0 million of uncertain tax benefit including interest and penalties will be settled within the next 12 months, which will impact the effective tax rate. Interest that is accrued on tax liabilities is recorded within interest expense on the condensed consolidated statements of operations.