XML 39 R23.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
 12 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for income taxes was as follows during fiscal 2021, 2020 and 2019: 
 Year ended September 30,
 202120202019
 (In thousands)
Current:
         Federal$43,437 $14,566 $1,299 
         State7,961 2,180 (423)
         Foreign35,615 12,482 15,371 
87,013 29,228 16,247 
Deferred:
         Federal(4,602)(8,575)7,003 
         State(948)(957)947 
         Foreign(405)893 (249)
(5,955)(8,639)7,701 
Total provision$81,058 $20,589 $23,948 
The foreign provision was based on foreign pre-tax earnings of $62.1 million, $42.2 million and $36.0 million in fiscal 2021, 2020 and 2019, respectively. Current foreign tax expense related to foreign tax withholdings was $7.5 million, $6.4 million and $6.5 million in fiscal 2021, 2020 and 2019, respectively. Foreign withholding tax and related foreign tax credits are included in current tax expense above.
 
Deferred tax assets and liabilities at September 30, 2021 and 2020 were as follows: 
 September 30,
 20212020
 (In thousands)
Deferred tax assets:
Loss and credit carryforwards$30,311 $31,015 
Compensation benefits29,305 29,640 
Operating lease liabilities 17,076 21,827 
Other assets16,711 9,000 
93,403 91,482 
Less: valuation allowance(28,403)(24,563)
Total deferred tax assets65,000 66,919 
Deferred tax liabilities:
  Intangible assets(10,518)(14,715)
  Deferred commission(10,520)(9,027)
  Property and equipment (487)(3,135)
  Operating lease right-of-use assets (11,258)(13,719)
  Other liabilities(11,668)(11,694)
Total deferred tax liabilities(44,451)(52,290)
Deferred tax assets, net$20,549 $14,629 
Based upon the level of historical taxable income and projections for future taxable income over the periods that the deferred tax assets will reverse, management believes it is more likely than not that we will realize the benefits of the deferred tax assets, net of the existing valuation allowance at September 30, 2021.
As of September 30, 2021, we had available U.S. federal and foreign net operating loss (“NOL”) carryforwards of approximately $6.7 million and $29.2 million, respectively. The U.S. federal NOLs were acquired in connection with our acquisitions of Adeptra in fiscal 2012 and Infoglide in fiscal 2013. The U.S. federal NOL carryforward will expire at various dates beginning in fiscal 2024, if not utilized. The $29.2 million of foreign NOL includes $4.9 million related to China and $18.1 million related to Germany. Due to a limited ability to utilize the China and Germany NOLs, a full valuation allowance has been recorded on the China and Germany NOLs, resulting in no tax benefit. Utilization of the U.S. federal NOL is subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended. We have available an excess California state research credit of approximately $17.1 million. The California state research credit does not have an expiration date; however, based on enacted law and expected future cash taxes, we have recorded a valuation allowance of $17.1 million. There is approximately $3.0 million of excess Foreign Tax Credit. The foreign tax credit is not expected to be utilized fully in future tax, and a valuation allowance of $3.0 million has been recorded.
A reconciliation of the provision for income taxes, with the amount computed by applying the U.S. federal statutory income tax rate of 21% to income before provision for income taxes for fiscal 2021, 2020 and 2019 is shown below:

 Year Ended September 30,
 202120202019
 (In thousands)
Income tax provision at U.S. federal statutory rate $99,360 $53,970 $45,375 
State income taxes, net of U.S. federal benefit 7,815 4,619 4,194 
Foreign tax rate differential1,490 493 839 
Research credits (6,795)(5,868)(5,761)
Valuation allowance3,839 5,332 (333)
Excess tax benefits relating to share-based compensation(15,573)(45,086)(24,891)
GILTI, FDII and BEAT(4,958)7,136 1,467 
Other (4,120)(7)3,058 
Recorded income tax provision$81,058 $20,589 $23,948 
The increase in our income tax provision in fiscal 2021 compared to fiscal 2020 is due to an increase in pretax book income, of which a large amount was due to the gain on divestiture of C&R business, as well as a decrease in excess tax benefits related to share-based compensation.
The decrease in our income tax provision in fiscal 2020 compared to fiscal 2019 is due to the excess tax benefits related to share-based compensation.
As of September 30, 2021, we had approximately $141.5 million of unremitted earnings of non-U.S. subsidiaries. The Company generates substantial cash flow in the U.S. and does not have a current need for the cash to be returned to the U.S. from the foreign entities. In the event these earnings are later remitted to the U.S., any estimated withholding tax and state income tax due upon remittance of those earnings is expected to be immaterial to the income tax provision.
Unrecognized Tax Benefit for Uncertain Tax Positions
We conduct business globally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. With a few exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax examinations for fiscal years prior to 2018.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 
 Year Ended September 30,
 202120202019
 (In thousands)
Gross unrecognized tax benefits at beginning of year$7,994 $5,834 $6,113 
Gross increases for tax positions in prior years— 883 509 
Gross decreases for tax positions in prior years(385)(65)(611)
Gross increases based on tax positions related to the current year 5,273 2,260 1,439 
Decreases for settlements and payments (643)— (637)
Decreases due to statute expiration(1,342)(918)(979)
Gross unrecognized tax benefits at end of year$10,897 $7,994 $5,834 
We had $10.9 million of total unrecognized tax benefits as of September 30, 2021, including $10.4 million of tax benefits that, if recognized, would impact the effective tax rate. Although the timing and outcome of audit settlements are uncertain, it is unlikely there will be a significant reduction of the uncertain tax benefits in the next twelve months.
We recognize interest expense and penalties related to unrecognized tax benefits and penalties as part of the provision for income taxes in our consolidated statements of income and comprehensive income. We recognize interest earned related to income tax matters as interest income in our consolidated statements of income and comprehensive income. As of September 30, 2021, we had accrued interest of $0.4 million related to the unrecognized tax benefits.