Income Taxes

6 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

For interim income tax reporting, the Company estimates its annual effective tax rate and applies it to fiscal year-to-date pretax (loss) income, excluding unusual or infrequently occurring discrete items. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded. The Company reported income tax benefit of $0.9 million and income tax expense of $(1.4) million for the three months ended March 31, 2022 and 2021, respectively, and income tax benefit of $1.6 million and income tax expense of $(1.6) million for the six months ended March 31, 2022 and 2021, respectively.

The effective income tax rate for the three and six months ended March 31, 2022 and 2021 differs from the U.S. federal statutory tax rate of 21% primarily due to favorable impacts of the U.S. federal research and development tax credits; operating results of one of our Irish subsidiaries for which tax benefit is offset by a valuation allowance; and the effects of equity compensation. The Company recognized discrete tax benefits related to stock-based compensation awards vested, expired, cancelled and exercised of less than $0.1 million and $0.7 million in the three months ended March 31, 2022 and 2021, respectively, and $0.1 million and $0.7 million in the six months ended March 31, 2022 and 2021, respectively.

The total amount of unrecognized tax benefits, excluding interest and penalties that, if recognized, would affect the effective tax rate was $3.0 million and $2.7 million as of March 31, 2022 and September 30, 2021, respectively. Interest and penalties related to unrecognized tax benefits are recorded in the income tax benefit (provision).

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. The Internal Revenue Service commenced an examination of the Company’s fiscal 2019 U.S. federal tax return in the second quarter of fiscal 2022; the examination has not been completed. U.S. federal income tax returns for years prior to fiscal 2018 are no longer subject to examination by federal tax authorities. For tax returns for U.S. state and local jurisdictions, the Company is no longer subject to examination for tax years generally before fiscal 2011. For tax returns for non-U.S. jurisdictions, the Company is no longer subject to income tax examination for years prior to 2017. Additionally, the Company has been indemnified of liability for any taxes relating to Creagh Medical, NorMedix and Vetex for periods prior to the respective acquisition dates, pursuant to the terms of the related share purchase agreements. There were no undistributed earnings in foreign subsidiaries as of March 31, 2022 and September 30, 2021.