Income Taxes

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes was as follows during fiscal 2023, 2022 and 2021: 

	Year ended September 30,
	2023		2022		2021
	(In thousands)
Current:
Federal	$	112,456	$	50,403	$	43,437
State	16,844		8,952		7,961
Foreign	42,327		30,597		35,615
	171,627		89,952		87,013
Deferred:
Federal	(37,884)		8,165		(4,602)
State	(15,025)		507		(948)
Foreign	5,531		(856)		(405)
	(47,378)		7,816		(5,955)
Total provision	$	124,249	$	97,768	$	81,058

The foreign provision was based on foreign pre-tax earnings of $172.7 million, $136.0 million and $62.1 million in fiscal 2023, 2022 and 2021, respectively. Current foreign tax expense related to foreign tax withholdings was $12.3 million, $9.5 million and $7.5 million in fiscal 2023, 2022 and 2021, respectively. Foreign withholding tax and related foreign tax credits are included in current tax expense above.

Deferred tax assets and liabilities at September 30, 2023 and 2022 were as follows: 

	September 30,
	2023		2022
	(In thousands)
Deferred tax assets:
Loss and credit carryforwards	$	12,309	$	19,122
Compensation benefits	30,490		29,344
Operating lease liabilities	9,396		13,065
Research and development costs	34,730		—
Other assets	17,327		14,744
	104,252		76,275
Less: valuation allowance	(2,183)		(16,635)
Total deferred tax assets	102,069		59,640
Deferred tax liabilities:
Intangible assets	(7,226)		(14,263)
Deferred commission	(14,017)		(12,419)
Operating lease right-of-use assets	(6,228)		(8,798)
Other liabilities	(15,462)		(12,357)
Total deferred tax liabilities	(42,933)		(47,837)
Deferred tax assets, net	$	59,136	$	11,803

Based upon the level of historical taxable income and projections for future taxable income over the periods that the deferred tax assets will reverse, management believes it is more likely than not that we will realize the benefits of the deferred tax assets, net of the existing valuation allowance at September 30, 2023.

As of September 30, 2023, we had available U.S. federal net operating loss (“NOL”) carryforwards of approximately $4.1 million. The U.S. federal NOLs were acquired in connection with our acquisitions of Adeptra in fiscal 2012 and Infoglide in fiscal 2013. The U.S. federal NOL carryforward will expire at various dates beginning in fiscal 2024, if not utilized. Utilization of the U.S. federal NOL is subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended. We had available an excess California state research credit of approximately $9.2 million as of September 30, 2023. There was approximately $2.2 million of foreign tax credit carryforwards as of September 30, 2023. The excess foreign tax credit can be carried forward for 10 years; however, based on enacted law and expected future usage, we have recorded a valuation allowance of $2.2 million as of September 30, 2023.

A reconciliation of the provision for income taxes, with the amount computed by applying the U.S. federal statutory income tax rate of 21% to income before provision for income taxes for fiscal 2023, 2022 and 2021 is shown below:

	Year Ended September 30,
	2023		2022		2021
	(In thousands)
Income tax provision at U.S. federal statutory rate	$	116,261	$	98,975	$	99,360
State income taxes, net of U.S. federal benefit	14,135		8,359		7,815
Foreign tax rate differential	9,489		3,058		1,490
Research credits	(3,600)		(5,932)		(6,795)
Valuation allowance	(14,451)		(11,768)		3,839
Excess tax benefits relating to share-based compensation	(949)		702		(15,573)
GILTI, FDII, BEAT and FTC	(9,010)		(2,491)		(4,958)
Other	12,374		6,865		(4,120)
Recorded income tax provision	$	124,249	$	97,768	$	81,058

As of September 30, 2023, we had approximately $27.2 million of unremitted earnings of non-U.S. subsidiaries. The Company has not provided deferred tax liabilities for foreign withholding taxes and certain state income taxes on the undistributed earnings and profits from certain non-U.S. subsidiaries that will be permanently reinvested outside the United States. In the event these earnings are later remitted to the U.S., any estimated withholding tax and state income tax due upon remittance of those earnings is expected to be immaterial to the income tax provision. For jurisdictions not permanently reinvested, the Company expects the net impact of any future repatriations to be immaterial to the Company’s overall tax liability.

Unrecognized Tax Benefit for Uncertain Tax Positions

We conduct business globally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. With a few exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax examinations for fiscal years prior to 2019.

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

	Year Ended September 30,
	2023		2022		2021
	(In thousands)
Gross unrecognized tax benefits at beginning of year	$	12,980	$	10,897	$	7,994
Gross increases for tax positions in prior years	—		593		—
Gross decreases for tax positions in prior years	(1,127)		—		(385)
Gross increases based on tax positions related to the current year	3,650		3,250		5,273
Decreases for settlements and payments	(523)		—		(643)
Decreases due to statute expiration	(1,131)		(1,760)		(1,342)
Gross unrecognized tax benefits at end of year	$	13,849	$	12,980	$	10,897

We had $13.8 million of total unrecognized tax benefits as of September 30, 2023, including $12.7 million of tax benefits that, if recognized, would impact the effective tax rate. Although the timing and outcome of audit settlements are uncertain, it is unlikely there will be a significant reduction of the uncertain tax benefits in the next twelve months.

We recognize interest expense and penalties related to unrecognized tax benefits and penalties as part of the provision for income taxes in our consolidated statements of income and comprehensive income. We recognize interest earned related to income tax matters as interest income in our consolidated statements of income and comprehensive income. As of September 30, 2023, we had accrued interest of $0.9 million related to the unrecognized tax benefits.