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Income and Other Taxes
 12 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income and Other Taxes Income and Other Taxes
The Company’s (loss) income from operations before income taxes consisted of the following:
Year Ended September 30,
(in thousands)20222021
Domestic$(22,510)$25,744 
Foreign(1,962)471 
(Loss) income before income taxes$(24,472)$26,215 

The Company’s income tax (benefit) expense consisted of the following:
Year Ended September 30,
(in thousands)20222021
Federal:
Current$(125)$— 
Deferred12 — 
(113)— 
State:
  Current(37)990 
  Deferred11 — 
(26)990 
Foreign:
Current— (418)
Deferred— — 
— (418)
Total income tax (benefit) expense$(139)$572 

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 continuing operations (loss) income before provision for income taxes is as follows:
Year Ended September 30,
(in thousands)20222021
Income tax expense (benefit) computed at U.S. federal statutory rate$(5,139)$5,506 
State tax expense (benefit), net of U.S. federal effect(27)990 
Foreign tax rate differential(73)24 
Effect due to change in tax rate— — 
Shortfall from stock based compensation141 (122)
Other84 103 
Federal benefit on PPP loan forgiveness— (1,363)
Change in uncertain tax positions— (419)
Net operating loss carryforward expiration11,924 454 
Change in valuation allowance(7,049)(4,601)
Income tax (benefit) expense$(139)$572 
Effective tax rate(0.6) %2.2  %

Significant components of deferred tax assets are as follows:
September 30,
(in thousands)20222021
Federal net operating loss carryforwards$89,236 $96,289 
Foreign net operating loss carryforwards1,448 1,372 
Income tax credit carryforwards592 2,510 
Inventory reserves2,397 2,229 
Accounts receivable reserves57 62 
Accrued warranty reserve264 269 
State net operating loss carryforwards6,822 6,356 
Stock compensation1,352 979 
Deferred compensation465 476 
Fixed assets and intangibles202 (497)
ROU lease liability5,862 3,289 
ROU lease assets(5,724)(3,195)
Other2,443 1,372 
Total deferred tax assets105,416 111,511 
Valuation allowance(105,439)(111,511)
Net deferred tax liabilities$(23)$— 

For the fiscal years ended September 30, 2022 and 2021, the Company recorded income tax benefit (expense) of approximately $0.1 million and $(0.6) million, respectively. Income tax benefit for the fiscal year ended September 30, 2022 is comprised primarily of federal refund of AMT credit and state minimum tax expense. Income tax expense for the fiscal year ended September 30, 2021 is comprised primarily of California state income tax due to temporary suspension of net operating loss credits and other state minimum tax expense, partially offset by the release of a reserve on uncertain tax benefits due to statutory limitation expiration.

For the fiscal years ended September 30, 2022 and 2021, the effective tax rate on operations was (0.6)%, and 2.2%, respectively. The lower tax rate for the fiscal year ended September 30, 2022 is primarily due to the federal refund of AMT credit. The Company uses some estimates to forecast permanent differences between book and tax accounting.

We have not provided for income taxes on non-U.S. subsidiaries’ undistributed earnings as of September 30, 2022 because we plan to indefinitely reinvest the unremitted earnings of the non-U.S. subsidiaries and all of the non-U.S. subsidiaries historically have negative earnings and profits.

All deferred tax assets have a full valuation allowance at September 30, 2022. 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 fiscal year ended September 30, 2021, the Company released the ASC 740-10 reserve on uncertain tax benefits due to statutory limitation expiration

As of September 30, 2022, the Company had net operating loss carryforwards for U.S. federal income tax purposes of approximately $424.9 million which begin to expire in 2023. As of September 30, 2022, the Company had foreign net operating loss carryforwards of $5.8 million which begin to expire in 2023 as well as state net operating loss carryforwards of approximately $78.8 million which begin to expire in 2023. As of September 30, 2022, the Company also had tax credits (primarily foreign income and U.S. research and development tax credits) of approximately $0.5 million. The research credits begin to expire in 2023. Utilization of net operating loss and tax credit carryforwards are subject to a substantial annual limitation due to the ownership change limitations set forth in Section 382 of the Code and similar state provisions. The Company prepared an Internal Revenue Code 382 analysis to determine the annual limitations on the Company’s consolidated net operating loss carryforwards. As a result of the $424.9 million of U.S. net operating loss carryforwards, approximately $165.4 million is subject to an annual limitation and $259.5 million of the net operating losses are not subject to an annual limitation. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before utilization.
A reconciliation of the beginning and ending amount of unrecognized gross tax benefits is as follows:
September 30,
(in thousands)20222021
Balance at beginning of period$— $419 
Adjustments based on tax positions related to the current year— — 
Adjustments based on tax positions of prior years— (419)
Balance at end of period$— $— 

As we released the entire unrecognized tax benefits, as well as the associated interest and penalties as of September 30, 2021, there is no uncertain tax positions that will be paid or settled within the next 12 months. Interest that is accrued on tax liabilities is recorded within interest expense on the consolidated statements of operations. There is no interest and penalties accrued as tax liabilities on the consolidated balance sheet.