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Income Taxes
 12 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
12. INCOME TAXES
The components of income before income taxes are (in thousands):
Year ended September 30,
202220212020
United States$13,220 $5,380 $3,756 
International5,408 3,619 3,707 
Income before income taxes$18,628 $8,999 $7,463 
The components of the income tax benefit are (in thousands):
Year ended September 30,
202220212020
Current:
Federal$281 $1,388 $709 
State766 242 572 
Foreign1,277 1,678 1,128 
Deferred:
Federal(2,982)(3,627)(2,911)
State— (618)— 
Foreign(97)(430)(446)
Income tax (benefit) expense$(755)$(1,367)$(948)
12. INCOME TAXES (CONTINUED)
Net deferred tax liability consists of (in thousands):
As of September 30,
20222021
Non-current deferred tax asset$— $439 
Non-current deferred tax liability(9,666)(13,493)
Net deferred tax liability$(9,666)$(13,054)
Depreciation and amortization$(4,930)$(1,399)
Lease asset(3,392)(3,683)
Lease liability4,497 4,941 
Inventories2,586 755 
Compensation costs3,999 4,064 
Other accruals7,413 6,387 
Tax credit carryforwards7,445 3,026 
Valuation allowance(2,976)(2,186)
Identifiable intangible assets(24,308)(24,959)
Net deferred tax liability$(9,666)$(13,054)
As of September 30, 2022, we had $3.0 million of tax carryforwards (net of reserves) related to state research and development tax credits. We also had $0.5 million of carryforwards consisting of a U.S. net operating losses of $0.2 million, non-U.S. net operating losses of $0.2 million and foreign tax credits of $0.1 million. The majority of our state research and development tax credits have a 15-year carryforward period. The majority of our non-U.S. net operating losses have an unlimited carryforward period. Our non-U.S. tax credit carryforwards will expire in 2034.Our valuation allowance for certain U.S. and foreign locations was $3.0 million at September 30, 2022 and $2.2 million at September 30, 2021. The increase in valuation allowance is primarily the result of additional reserves against R&D credits. The deferred tax assets realized could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities or changes in the amounts of future taxable income. If future taxable income projections are not realized, an additional valuation allowance may be required. This would be reflected as income tax expense at the time that any such change in future taxable income is determined.
12. INCOME TAXES (CONTINUED)
The reconciliation of the statutory federal income tax amount to our income tax benefit is (in thousands):
Year ended September 30,
202220212020
Statutory income tax amount$3,912 $1,890 $1,567 
Increase (decrease) resulting from:
State taxes, net of federal benefits85 319 392 
Transaction costs2 60 143 
Employee stock purchase plan98 79 127 
Foreign operations1,552 556 431 
Non-deductible executive compensation291 150 115 
Change in valuation allowance— (2,187)173 
Capital Loss Expiration— 2,301 — 
Utilization of research and development tax credits(2,780)(3,116)(2,881)
Deferred balance sheet remeasure— (952)— 
ASU 2016-09 excess stock compensation(2,967)(1,131)(673)
Contingent consideration(1,239)1,212 (27)
Changes from provision to return413 (458)(111)
Adjustment of tax contingency reserves417 329 151 
U.S. deduction for foreign export sales(584)(630)(355)
Global intangible low-taxed income— 33 31 
Other, net45 178 (31)
Income tax (benefit) expense$(755)$(1,367)$(948)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is (in thousands):
Year ended September 30,
202220212020
Unrecognized tax benefits at beginning of fiscal year$2,908 $2,600 $1,713 
Increases related to:
Prior year income tax positions— 40 756 
Current year income tax positions524 507 425 
Decreases related to:
Prior year income tax positions(21)(155)— 
Settlements— — (7)
Expiration of statute of limitations(95)(84)(287)
Unrecognized tax benefits at end of fiscal year$3,316 $2,908 $2,600 
The total amount of unrecognized tax benefits ("UTB") at September 30, 2022 that, if recognized, would affect our effective tax rate was $3.3 million. We expect that it is reasonably possible that the total amounts of UTB will decrease by approximately $0.3 million over the next 12 months due to the expiration of various statutes of limitations. Of the $3.3 million of UTB, $2.4 million is included in non-current income taxes payable and $0.9 million is included with non-current deferred tax liabilities on the consolidated balance sheets at September 30, 2022.
We recognize interest and penalties related to income tax matters in income tax expense. During fiscal 2022 and 2021, there were insignificant amounts of interest and penalties related to income tax matters in income tax expense. We accrued $0.1 million in interest and no penalties related to unrecognized tax benefits as of September 30, 2022 and 2021. These accrued interest and penalties are included in our non-current income taxes payable on our consolidated balance sheets.
12. INCOME TAXES (CONTINUED)
We operate in multiple tax jurisdictions both in the U.S. and outside of the U.S. and face audits from various tax authorities regarding transfer pricing, tax credits, and other matters. Accordingly we must determine the appropriate allocation of income to each of these jurisdictions. This determination requires us to make several estimates and assumptions. Tax audits associated with the allocation of this income, and other complex issues, may require an extended period of time to resolve and may result in adjustments to our income tax balances in those years that are material to our consolidated balance sheets and results of operations.
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before fiscal year 2018. We are currently under U.S. federal examination for fiscal years 2018, and there is otherwise very limited audit activity of our income tax returns in U.S. state jurisdictions or international jurisdictions.
At September 30, 2022, the majority of undistributed foreign earnings are taxed under the one time transition tax and the global intangible low-taxed income ("GILTI") provision of the Tax Cuts and Jobs Act of 2017. Additionally, the previously un-taxed accumulated undistributed foreign earnings from prior fiscal years are still permanently reinvested and, as such, we have not accrued additional U.S. tax. It is our position that the earnings of our foreign subsidiaries are to be reinvested indefinitely to fund current operations and provide for future international expansion opportunities and only repatriate earnings to the extent that U.S. taxes have already been recorded. As of September 30, 2022, we are permanently reinvested with respect to previously non-taxed accumulated earnings in all jurisdictions.
Although we have no current need to repatriate historical foreign earnings that have not been taxed in the U.S., if we change our assertion from indefinitely reinvesting undistributed foreign earnings, we would have to accrue applicable taxes. The amount of any taxes and the application of any tax credits would be determined based on the income tax laws at the time of such repatriation. Under current tax law, we estimate the unrecognized tax liability to be immaterial.