Income Taxes

The components of loss before income tax benefit are as follows:



	Years Ended September 30,
	2019			2018
U.S.	$	3,416		$	(7,582	)
Non-U.S.	(11,623		)	51
Loss before income tax benefit	$	(8,207	)	$	(7,531	)

Income tax benefit consist of the following:



	Years Ended September 30,
	2019			2018
Current income tax provision (benefit):
U.S. federal	$	—		$	(19	)
U.S. state and local	(27		)	5
Non-U.S.	(109		)	472
Total current tax provision (benefit)	(136		)	458
Deferred income tax provision (benefit):
U.S. federal	8			(462		)
U.S. state and local	2			(30		)
Non-U.S.	(575		)	(327		)
Total deferred tax provision (benefit)	(565		)	(819		)
Income tax benefit	$	(701	)	$	(361	)

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



	Years Ended September 30,
	2019			2018
Loss before income tax benefit	$	(8,207	)	$	(7,531	)

Income tax benefit at U.S. federal statutory rates	$	(1,723	)	$	(1,582	)
Tax effect of:
Foreign rate differential	1,698			694
State and local income taxes	14			(25		)
Impact of tax law changes	—			820
Federal tax credits	(144		)	(1,573		)
Valuation allowance	(556		)	1,243
Prior year tax adjustments	—			(211		)
Other	10			273
Income tax benefit	$	(701	)	$	(361	)

On December 22, 2017, the Tax Cut and Jobs Act (the "Act") was enacted that, 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 required, during the first quarter of fiscal 2019, the Company completed its accounting for items previously considered provisional during fiscal 2018. At September 30, 2018, the Company's provisional estimate with respect to the one-time transition tax was $240, net of applicable foreign tax credits generated. As a result of the valuation allowance in the U.S. on tax attribute carry forwards, no charge to tax expense was recorded related to the one-time transition tax. The Company continues to interpret the law and additional guidance related to the Act during the measurement period and no measurement period adjustment was made during the first quarter of fiscal 2019, upon finalization of the one-time transition tax. All other items of the Act were considered complete at September 30, 2018.

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 was effective for the Company starting in fiscal 2019. The Company has elected to account for GILTI as a component of tax expense in the period in which the Company is subject to the rules.

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



	2019			2018
Deferred tax assets:
Net U.S. operating loss carryforwards	$	5,002		$	3,200
Net non-U.S. operating loss carryforwards	866			592
Employee benefits	2,456			1,656
Inventory reserves	970			1,029
Allowance for doubtful accounts	144			126
Intangibles	2,535			2,826
Foreign tax credits	1,724			1,956
Other tax credits	1,232			1,164
Other	918			1,015
Total deferred tax assets	15,847			13,564
Deferred tax liabilities:
Depreciation	(8,135		)	(5,449		)
Prepaid expenses	(192		)	(296		)
Other	(1,681		)	(1,832		)
Total deferred tax liabilities	(10,008		)	(7,577		)
Net deferred tax assets	5,839			5,987
Valuation allowance	(7,557		)	(8,400		)
Net deferred tax liabilities	$	(1,718	)	$	(2,413	)

At September 30, 2019, the Company has a non-U.S. tax loss carryforward of approximately $6,618 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. Additionally, a valuation allowance has been recorded in fiscal 2019 against a portion of the deferred tax asset related to the Italian tax loss carryforward that was not considered realizable. The Irish and Italian tax loss carryforwards do not expire.

The Company has $1,724 of foreign tax credit carryforwards that are subject to expiration in fiscal 2023-2028, $1,054 of U.S. general business tax credits that are subject to expiration in 2035-2039, and $19,358 of U.S. Federal tax loss carryforwards with $12,625 subject to expiration in fiscal 2036-2037 and $6,733 that do not expire. 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 $178 of U.S. state tax credit carryforwards subject to expiration in fiscal 2022-2024 and $33,253 of U.S. state and local tax loss carryforwards subject to expiration in fiscal 2020-2039. 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 $22 and $53 in fiscal 2019 and 2018. If recognized, $22 of the fiscal 2019 uncertain tax positions would impact the effective tax rate. As of September 30, 2019, the Company had accrued interest of $13 and recognized $0.8 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:



	2019			2018
Balance at beginning of year	$	53		$	69
Decrease due to lapse of statute of limitations	(31		)	(16		)
Balance at end of year	$	22		$	53

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 2016, state and local income tax examinations for fiscal years prior to 2014, or non-U.S. income tax examinations by tax authorities for fiscal years prior to 2007.

The Company does not record deferred taxes on the undistributed earnings of its non-U.S. subsidiaries as it does not expect the temporary differences related to those unremitted earnings to reverse in the foreseeable future. As of September 30, 2019, the Company's non-U.S. subsidiaries had accumulated deficits of approximately $127. Future distributions of accumulated earnings of the Company's non-U.S. subsidiaries may be subject to nominal withholding taxes.