Income Tax Expense

12 Months Ended

Sep. 30, 2022

Income Tax Expense

Income Tax Expense

7.      Income Tax Expense

We allocated total income tax expense for the years ended September 30, 2022, 2021 and 2020 to income tax expense as follows:

(Dollars in thousands)	2022		2021	2020
Income tax expense from continuing operations	$	24,115	17,175	13,510
Income tax expense from discontinued operations		—	—	23,501
Total income tax expense (benefit)	$	24,115	17,175	37,011

The components of income from continuing operations before income taxes for 2022, 2021 and 2020 consisted of the following:

(Dollars in thousands)	2022		2021	2020
United States	$	90,674	70,214	23,951
Foreign		15,761	10,457	12,455
Total income before income taxes	$	106,435	80,671	36,406

The principal components of income tax expense (benefit) from continuing operations for 2022, 2021 and 2020 consist of:

(Dollars in thousands)	2022		2021	2020
Federal:
Current	$	7,248	14,807	10,495
Deferred		9,752	(1,598)	1,311
State and local:
Current		1,635	2,257	1,984
Deferred		1,774	(786)	(932)
Foreign:
Current		4,645	2,922	2,875
Deferred		(939)	(427)	(2,223)
Total	$	24,115	17,175	13,510

The actual income tax expense from continuing operations for 2022, 2021 and 2020 differs from the expected tax expense for those years (computed by applying the U.S. Federal corporate statutory rate) as follows:

	2022		2021		2020
Federal corporate statutory rate	21.0	%	21.0	%	21.0	%
State and local, net of Federal benefits	2.9		1.9		2.3
Impact of foreign operations	(0.3)		(0.4)		1.3
Federal research credit	(0.3)		(0.9)		(3.7)
Executive compensation	0.5		0.9		1.6
Valuation allowance	(0.3)		—		(6.8)
U.S. tax on GILTI	1.8		1.0		3.2
GILTI foreign tax credits	(1.5)		(0.6)		(2.7)
FDII deduction	(0.9)		(1.7)		(2.6)
Pension plan termination charge	—		—		23.4
Other, net	(0.2)		0.1		0.1
Effective income tax rate	22.7	%	21.3	%	37.1	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at September 30, 2022 and 2021 are presented below:

(Dollars in thousands)	2022		2021
Deferred tax assets:
Inventories	$	4,990	4,267
Pension and other postretirement benefits		664	859
Timing differences related to revenue recognition		61	9,365
Lease liabilities		7,073	7,614
Net operating and capital loss carryforwards — domestic		575	542
Net operating loss carryforward — foreign		3,396	4,279
Other compensation-related costs and other cost accruals		9,032	8,174
State credit carryforward		1,676	2,639
Foreign credit carryforward		203	192
Total deferred tax assets		27,670	37,931
Deferred tax liabilities:
ROU assets		(7,073)	(7,614)
Goodwill		(11,691)	(13,746)
Acquisition intangible assets		(62,051)	(62,052)
Depreciation, software amortization		(24,503)	(22,418)
Net deferred tax liabilities before valuation allowance		(77,648)	(67,899)
Less valuation allowance		(1,208)	(2,011)
Net deferred tax liabilities	$	(78,856)	(69,910)

We had a foreign net operating loss (NOL) carryforward of $12.1 million at September 30, 2022, which reflects tax loss carryforwards in Germany, South Africa, Canada, Japan and the United Kingdom. Approximately $10.4 million of the tax loss carryforwards have no expiration date while the remaining $1.7 million will expire between 2031 and 2041. We had net foreign credit carryforwards of $0.2 million, that will expire between 2041 and 2042.We had deferred tax assets related to state NOL carryforwards of $0.6 million at September 30, 2022 which expire between 2025 and 2042. We also had net state research and other credit carryforwards of $1.7 million of which $0.9 million expires between 2024 and 2037. The remaining $0.8 million does not have an expiration date.

The valuation allowance for deferred tax assets as of September 30, 2022 and 2021 was $1.2 million and $2.0 million, respectively. The net change in the total valuation allowance for each of the years ended September 30, 2022 and 2021 was a decrease of $0.8 million and an increase of $0.1 million, respectively.We established a valuation allowance against state credit carryforwards of $0.6 million at September 30, 2021. This balance was released as of September 30, 2022. In addition, we maintained a valuation allowance against state NOL carryforwards that are not expected to be realized in future periods of $0.5 million at September 30 of both 2022 and 2021. Lastly, we established a valuation allowance against certain NOL carryforwards in foreign jurisdictions which may not be realized in future periods of $0.7 million and $0.9 million at September 30, 2022 and 2021, respectively.

As of September 30, 2022, the Company does not have any material unrecognized tax benefits.