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Income Taxes (Tables)

12 Months Ended

Sep. 30, 2022

Income taxes on the consolidated statements of operations consisted of the following:


	Fiscal Year
(In thousands)	2022			2021			2020
Current (benefit) expense:
U.S. Federal	$	(510	)	$	263		$	(1,570	)
U.S. State		(143	)		108			42
International		166			87			90
Total current (benefit) expense		(487	)		458			(1,438	)
Deferred expense (benefit):
U.S. Federal		5,200			1,851			(1,336	)
U.S. State		515			(62	)		197
International		(447	)		(138	)		—
Total deferred expense (benefit)		5,268			1,651			(1,139	)
Total income tax expense (benefit)	$	4,781		$	2,109		$	(2,577	)

Schedule of Reconciliation Difference of Income Taxes

The difference between amounts calculated at the statutory U.S. federal income tax rate of 21% and the Company’s effective tax rate was as follows:


	Fiscal Year
(In thousands)	2022			2021			2020
Amount at statutory U.S. federal income tax rate	$	(4,724	)	$	1,333		$	(305	)
Change because of the following items:
State income taxes, net of federal benefit		(897	)		(273	)		(551	)
Foreign and state rate differential		628			596			212
U.S. federal and foreign R&D credits		(1,511	)		(920	)		(1,571	)
Valuation allowance change (1)		10,978			1,059			825
Stock-based compensation (2)		481			(544	)		(81	)
U.S. Federal and state rate change		—			(35	)		17
Tax reserve change		(123	)		(150	)		609
Foreign-derived income deduction		—			—			(88	)
Impact of CARES Act (3)		—			735			(1,700	)
Acquisition-related transaction costs		—			187			—
Other		(51	)		121			56
Income tax expense (benefit)	$	4,781		$	2,109		$	(2,577	)

(1)

In fiscal 2022, the valuation allowance change includes a non-cash charge to income tax expense of $10.2 million that resulted from the establishment of a full valuation allowance against U.S. net deferred tax assets as of September 30, 2022. A valuation allowance is required to be recognized against deferred tax assets if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) that all or a portion of such assets will not be realized. The relevant guidance weighs available evidence such as historical cumulative taxable losses more heavily than future profitability. The valuation allowance has no impact on the availability of U.S. net deferred tax assets to offset future tax liabilities.

(2)

Includes non-deductible stock-based compensation.

(3)

In fiscal 2020, the impact of the CARES Act included a discrete tax benefit of $1.7 million that resulted from our ability under the CARES Act to carry back net operating losses (“NOLs”) incurred to periods when the statutory tax rate was 35% versus our current tax rate of 21%. In March 2020, the CARES Act was enacted and included significant business tax provisions. In particular, the CARES Act modified the rules associated with NOLs and made technical corrections to tax depreciation methods for qualified improvement property. Under the temporary provisions of the CARES Act, NOL carryforwards and carrybacks may offset 100% of taxable income for taxable years beginning before 2021. In addition, NOLs arising in 2018, 2019 and 2020 taxable years may be carried back to each of the preceding five years to generate a refund.

Schedule of Deferred Income Taxes, Net

The components of deferred income taxes, net, consisted of the following and resulted from differences in the recognition of transactions for income tax and financial reporting purposes:


	September 30,
(In thousands)	2022			2021
Depreciable assets	$	(3,995	)	$	(5,106	)
Deferred revenue		2,103			2,130
Accruals and reserves		1,615			1,572
Stock-based compensation		2,443			1,997
Impaired strategic investments		1,787			1,782
NOL carryforwards (1)		6,379			4,319
U.S. Federal and state R&D credits (2)		4,465			3,066
Other		848			618
Valuation allowance		(17,672	)		(7,253	)
Deferred taxes, net	$	(2,027	)	$	3,125

(1)

As of September 30, 2022, NOL carryforwards consisted of U.S. federal NOL carryforwards of $2.3 million, U.S. state NOL carryforwards of $0.4 million, and Ireland NOL carryforwards of $3.7 million. U.S. federal and state NOL carryforwards begin to expire in fiscal 2034 and 2028, respectively. Ireland NOL carryforwards have an unlimited carryforward period.

(2)

As of September 30, 2022, U.S. federal and state R&D credits begin to expire in fiscal 2028.

Summary of Reconciliation of Changes in Unrecognized Tax Benefits

Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for accounting purposes pursuant to accounting guidance. The following is a reconciliation of the changes in unrecognized tax benefits, excluding interest and penalties:


	Fiscal Year
(In thousands)	2022			2021			2020
Unrecognized tax benefits, beginning balance	$	2,887		$	2,871		$	2,323
Increases in tax positions for prior years		53			15			58
Decreases in tax positions for prior years		(35	)		(8	)		(1	)
Increases in tax positions for current year		519			458			664
Settlements with taxing authorities		—			—			—
Lapse of the statute of limitations		(631	)		(449	)		(173	)
Unrecognized tax benefits, ending balance	$	2,793		$	2,887		$	2,871