Income Taxes

The components of loss from operations before income tax provision (benefit) are as follows:



	Years Ended September 30,
	2018			2017
U.S.	$	(7,582	)	$	(15,574	)
Non-U.S.	51			2,434
Loss before income tax provision (benefit)	$	(7,531	)	$	(13,140	)

Income taxes from operations before income tax provision (benefit) consist of the following:



	Years Ended September 30,
	2018			2017
Current income tax provision (benefit):
U.S. federal	$	(19	)	$	(64	)
U.S. state and local	5			(11		)
Non-U.S.	472			951
Total current tax provision (benefit)	458			876
Deferred income tax provision (benefit):
U.S. federal	(462		)	147
U.S. state and local	(30		)	5
Non-U.S.	(327		)	41
Total deferred tax provision	(819		)	193
Income tax provision (benefit)	$	(361	)	$	1,069

The income tax provision (benefit) from operations in the accompanying consolidated statements of operations differs from amounts determined by using the statutory rate as follows:



	Years Ended September 30,
	2018			2017
Loss before income tax benefit	$	(7,531	)	$	(13,140	)

Income tax benefit at U.S. federal statutory rates	$	(1,582	)	$	(4,599	)
Tax effect of:
Foreign rate differential	694			120
State and local income taxes	(25		)	(6		)
Impact of tax law changes	820			(103		)
Federal tax credits	(1,573		)	(252		)
Valuation allowance	1,243			5,720
Prior year tax adjustments	(211		)	34
Other	273			155
Income tax provision (benefit)	$	(361	)	$	1,069

On December 22, 2017, the Tax Cut and Jobs Act (the "Act") was enacted which, among other items, reduced the U.S. corporate tax rate effective January 1, 2018 from 35% to 21%, imposed a one-time transition tax on accumulated foreign earnings not previously subject to U.S. taxation, provides a U.S. federal tax exemption on future distributions of foreign earnings, and beginning in fiscal 2019, creates a new minimum tax on certain foreign-sourced earnings. The U.S. corporate tax rate reduction resulted in a blended tax rate of 24.5% for fiscal 2018 (based on 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal 2018). In response to the Act, the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin 118 ("SAB 118"). SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes ("Topic 740") in the reporting period that includes the enactment date of the Act. The SEC staff, in issuing SAB 118 recognized that a company’s review of certain income tax effects of the Act may be incomplete at the time the financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year from the day of enactment.

As a result of the U.S. corporate tax rate reduction, the Company revalued its gross U.S. deferred taxes and the related valuation allowance. The revaluation, which is considered complete as of the first quarter of fiscal 2018, resulted in a tax benefit of $207 during fiscal 2018. Additionally, the Company released $267 of valuation allowance on a portion of its U.S. deferred tax assets as a result of deferred tax liabilities for indefinite lived intangible assets now considered available as a source of income as a result of the Act.

At September 30, 2018, the Company's estimate with respect to the one-time transition tax of $240, net of applicable foreign tax credits generated, remains provisional as the Company continues to analyze undistributed foreign earnings and profits for purposes of filing the U.S. federal income tax return for fiscal 2018. In addition, the Company continues to interpret the law and guidance related to the Act issued as of the date of these financial statements. On August 1, 2018, the U.S. Treasury released proposed regulations relating to the one-time transition tax. The proposed regulations are subject to a 60-day comment period. Final regulations are expected to be issued after consideration of the comments. As a result of the valuation allowance in the U.S. on tax attribute carryforwards, no charge to tax expense was recorded related to the one-time transition tax.

The Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein minimum taxes are imposed on foreign income in excess of a deemed return on the tangible assets of foreign corporations. This income will effectively be taxed at a 10.5% tax rate. GILTI is effective for the Company starting in fiscal 2019. Because of the complexity of the new provisions, the Company is continuing to evaluate how the provisions will be accounted for under the U.S. generally accepted accounting principles wherein companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which the Company is subject to the rules (the “period cost method”), or (ii) account for GILTI in the Company’s measurement of deferred taxes (the “deferred method”). Currently, the Company has not elected a method and will only do so after its completion of the analysis of the GILTI provisions.

Deferred tax assets and liabilities at September 30 consist of the following:



	2018			2017
Deferred tax assets:
Net U.S. operating loss carryforwards	$	3,200		$	5,188
Net non-U.S. operating loss carryforwards	592			596
Employee benefits	1,656			2,461
Inventory reserves	1,029			1,240
Allowance for doubtful accounts	126			135
Intangibles	2,826			4,873
Foreign tax credits	1,956			602
Other tax credits	1,164			994
Other	1,015			1,126
Total deferred tax assets	13,564			17,215
Deferred tax liabilities:
Depreciation	(5,449		)	(8,854		)
Unremitted foreign earnings	—			(65		)
Prepaid expenses	(296		)	(247		)
Other	(1,832		)	(1,718		)
Total deferred tax liabilities	(7,577		)	(10,884		)
Net deferred tax assets	5,987			6,331
Valuation allowance	(8,400		)	(9,597		)
Net deferred tax liabilities	$	(2,413	)	$	(3,266	)

At September 30, 2018, the Company has a non-U.S. tax loss carryforward of approximately $5,458 related to the Company’s Irish and Italian subsidiaries. The Company's Irish subsidiary ceased operations in 2007 and therefore, a valuation allowance has been recorded against the deferred tax asset related to the Irish tax loss carryforward because it is unlikely that such operating loss can be utilized unless the Irish subsidiary resumes operations. The Irish tax loss carryforward does not expire.

The Company has $1,956 of foreign tax credit carryforwards that are subject to expiration in fiscal 2023-2028, $999 of U.S. general business tax credits that are subject to expiration in 2035-2038, and $11,727 of U.S. Federal tax loss carryforwards subject to expiration in fiscal 2036-2037. A valuation allowance has been recorded against the deferred tax assets related to the foreign tax credit carryforwards, U.S. general business credits, and U.S. Federal tax loss carryforwards.

In addition, the Company has $165 of U.S. state tax credit carryforwards subject to expiration in fiscal 2022-2024 and $27,125 of U.S. state and local tax loss carryforwards subject to expiration in fiscal 2020-2038. The U.S. state tax credit carryforwards and U.S. state and local tax loss carryforwards have been fully offset by a valuation allowance.

The Company reported liabilities for uncertain tax positions, excluding any related interest and penalties, of $53 and $69 in fiscal 2018 and 2017. If recognized, $53 of the fiscal 2018 uncertain tax positions would impact the effective tax rate. As of September 30, 2018, the Company had accrued interest of $21 and recognized $2 for interest and penalties in operations. The Company classifies interest and penalties on uncertain tax positions as income tax expense. A summary of activity related to the Company’s uncertain tax position is as follows:



	2018			2017
Balance at beginning of year	$	69		$	69
Decrease due to lapse of statute of limitations	(16		)	—
Balance at end of year	$	53		$	69

The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy and various states and local jurisdictions. The Company believes it has appropriate support for its federal income tax returns. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for fiscal years prior to 2015, state and local income tax examinations for fiscal years prior to 2013, or non-U.S. income tax examinations by tax authorities for fiscal years prior to 2007.

As of September 30, 2018, the Company has $11,363 of undistributed earnings of non-U.S. subsidiaries for which no deferred taxes for foreign withholding tax is required as the Company intends to indefinitely reinvest these earnings outside the U.S. A nominal withholding tax charge is required if these earnings are distributed.