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Income Taxes
9 Months Ended
Jun. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

For interim income tax reporting, the Company estimates its annual effective tax rate and applies it to year-to-date pretax income (loss), excluding unusual or infrequently occurring discrete items. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded. The Company recorded income tax benefit of $0.3 million and $2.6 million for the three months ended June 30, 2019 and 2018, respectively. The Company recorded income tax benefit of $0.6 million and $2.8 million for the nine months ended June 30, 2019 and 2018. In December 2017, the Tax Cuts and Jobs Act tax legislation was signed into law, which reduced the U.S. Federal statutory tax rate from 35% to 21%, among other changes. As a result of the enactment of this legislation, the tax benefit for the first nine months of fiscal 2018 included discrete tax expense of $1.2 million from the Company’s net deferred tax assets revaluation based on the enacted tax rate of 21%, as compared with the previous rate of 35%.

The effective income tax rate for the three and nine months ended June 30, 2019 differs from the U.S. federal statutory tax rate of 21% primarily due to the favorable impacts of increased U.S. federal research and development tax credits in both periods, as well as stock award activity in the nine-month period and operating results of our Irish subsidiary, where tax expense is offset by a valuation allowance. The effective income tax rate for the three and nine months ended June 30, 2018 differs from the U.S. federal statutory tax rate of 24.5% primarily due to operating results of our Irish subsidiary, where tax benefits are offset by a valuation allowance, as well as the discrete tax expense from the re-valuation of net deferred tax assets resulting from the change in the enacted tax rate. These increases to the effective income tax rate for the fiscal 2018 periods were partially offset by the U.S. federal research and development income tax credit, stock award activity and non-tax-benefited contingent consideration gains, including fair value adjustments, as well as unrealized foreign currency translation gains on Euro-denominated contingent consideration liabilities. The effective income tax rate for the three months ended June 30, 2019 and 2018 was impacted by discrete tax benefits of less than $0.1 million and $1.0 million, respectively, related to share awards vested, expired, cancelled and exercised during the periods. The effective income tax rate for the nine months ended June 30, 2019 and 2018 was impacted by discrete tax benefits of $0.5 million and $1.4 million, respectively, related to share awards vested, expired, cancelled and exercised during the periods.

The total amount of unrecognized tax benefits, excluding interest and penalties that, if recognized, would affect the effective tax rate is $2.1 million and $1.4 million as of June 30, 2019 and September 30, 2018, respectively. Interest and penalties related to unrecognized tax benefits are recorded in the income tax benefit.

The Company files income tax returns, including returns for its subsidiaries, in the U.S. federal jurisdiction and in various state jurisdictions as well as several non-U.S. jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. U.S. income tax returns for years prior to fiscal 2016 are no longer subject to examination by federal tax authorities. For tax returns for state and local jurisdictions, the Company is no longer subject to examination for tax years generally before fiscal 2007. For tax returns for non-U.S. jurisdictions, the Company is no longer subject to income tax examination for years prior to 2012. Additionally, the Company has been indemnified of liability for any taxes relating to Creagh Medical and NorMedix for periods prior to their respective acquisition dates, pursuant to the terms of the related share purchase agreements. As of June 30, 2019 and September 30, 2018, there were no undistributed earnings in foreign subsidiaries. The Internal Revenue Service (“IRS”) completed an examination of our fiscal 2016 U.S. federal income tax return in the third quarter of fiscal 2018, with an immaterial payment made associated primarily with timing adjustments.