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Income Taxes
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
10. INCOME TAXES
The components of income before income taxes are (in thousands):
Year ended September 30,
202420232022
United States$19,088 $21,149 $13,220 
International3,770 3,769 5,408 
Income before income taxes$22,858 $24,918 $18,628 
The components of the income tax expense are (in thousands):
Year ended September 30,
202420232022
Current:
Federal$9,149 $9,894 $281 
State1,995 1,955 766 
Foreign832 598 1,277 
Deferred:
Federal(11,189)(12,131)(2,982)
Foreign(434)(168)(97)
Income tax (benefit) expense$353 $148 $(755)
10. INCOME TAXES (CONTINUED)
Net deferred tax liability consists of (in thousands):
As of September 30,
20242023
Non-current deferred tax asset$16,141 $4,884 
Non-current deferred tax liability(1,308)(1,812)
Net deferred tax asset (liability)$14,833 $3,072 
Depreciation and amortization$(4,735)$(3,362)
Lease asset(2,283)(2,866)
Lease liability3,183 3,897 
Inventories6,614 6,407 
Compensation costs5,552 5,559 
Deferred Revenue7,595 5,687 
Other accruals5,805 3,324 
Tax credit carryforwards3,854 3,867 
Valuation allowance(3,317)(3,254)
Identifiable intangible assets(25,533)(25,276)
Research and development costs18,098 9,089 
Net deferred tax asset (liability)$14,833 $3,072 
As of September 30, 2024, we had $3.2 million of tax carryforwards (net of reserves) related to state research and development tax credits. We also had $0.2 million of State net operating losses, non-U.S. net operating losses of $0.2 million, U.S. foreign tax credits of $0.1 million and foreign tax credits of $0.2 million. The majority of our state research and development tax credits have a 15-year carryforward period. The majority of our non-U.S. net operating losses and tax credit carryforwards have an unlimited carryforward period. Our non-U.S. tax credit carryforwards will expire in 2034. Our valuation allowance for certain U.S. and foreign attributes was $3.3 million at September 30, 2024 and September 30, 2023. The deferred tax assets realized could vary if there are differences in the timing or amount of future reversals of existing deferred tax liabilities or changes in the amounts of future taxable income. If future taxable income projections are not realized, an additional valuation allowance may be required. This would be reflected as income tax expense at the time that any such change in future taxable income is determined.
10. INCOME TAXES (CONTINUED)
The reconciliation of the statutory federal income tax amount to our income tax benefit is (in thousands):
Year ended September 30,
202420232022
Statutory income tax amount$4,800 $5,233 $3,912 
Increase (decrease) resulting from:
State taxes, net of federal benefits401 636 85 
Transaction costs— — 2 
Employee stock purchase plan159 165 98 
Foreign operations1,751 984 1,552 
Non-deductible executive compensation519 373 291 
Utilization of research and development tax credits(5,224)(4,678)(2,780)
ASU 2016-09 excess stock compensation(47)(1,678)(2,967)
Contingent consideration— — (1,239)
Changes from provision to return(791)181 413 
Adjustment of tax contingency reserves491 238 417 
U.S. deduction for foreign export sales(1,827)(1,419)(584)
Other, net121 113 45 
Income tax (benefit) expense$353 $148 $(755)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is (in thousands):
Year ended September 30,
202420232022
Unrecognized tax benefits at beginning of fiscal year$3,162 $3,316 $2,908 
Increases related to:
Prior year income tax positions71 100 — 
Current year income tax positions768 858 524 
Decreases related to:
Prior year income tax positions— (159)(21)
Expiration of statute of limitations(399)(953)(95)
Unrecognized tax benefits at end of fiscal year$3,602 $3,162 $3,316 
The total amount of unrecognized tax benefits ("UTB") at September 30, 2024 that, if recognized, would affect our effective tax rate was $3.4 million. We expect that it is reasonably possible that the total amounts of UTB will decrease by approximately $0.4 million over the next 12 months due to the expiration of various statutes of limitations. Of the $3.6 million of UTB, $2.7 million is included in non-current income taxes payable and $0.9 million is included with non-current deferred tax assets on the consolidated balance sheets at September 30, 2024.
We recognize interest and penalties related to income tax matters in income tax expense. During fiscal 2024 and 2023, there were insignificant amounts of interest and penalties related to income tax matters in income tax expense. We accrued $0.1 million in interest and penalties related to unrecognized tax benefits as of September 30, 2024 and 2023. These accrued interest and penalties are included in our non-current income taxes payable on our consolidated balance sheets.
10. INCOME TAXES (CONTINUED)
We operate in multiple tax jurisdictions both in the U.S. and outside of the U.S. and face audits from various tax authorities regarding transfer pricing, tax credits, and other matters. Accordingly we must determine the appropriate allocation of income to each of these jurisdictions. This determination requires us to make several estimates and assumptions. Tax audits associated with the allocation of this income, and other complex issues, may require an extended period of time to resolve and may result in adjustments to our income tax balances in those years that are material to our consolidated balance sheets and results of operations.
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before fiscal year 2020.
At September 30, 2024, the majority of undistributed foreign earnings were taxed under the one time transition tax and the global intangible low-taxed income ("GILTI") provision of the Tax Cuts and Jobs Act of 2017. Additionally, the previously un-taxed accumulated undistributed foreign earnings from prior fiscal years are still permanently reinvested and, as such, we have not accrued additional U.S. tax. It is our position that the earnings of our foreign subsidiaries are to be reinvested indefinitely to fund current operations and provide for future international expansion opportunities and only repatriate earnings to the extent that U.S. taxes have already been recorded. As of September 30, 2024, we are permanently reinvested with respect to previously non-taxed accumulated earnings in all jurisdictions.
Undistributed foreign earnings remain indefinitely reinvested in foreign operations. If we change our assertion from indefinitely reinvesting undistributed foreign earnings, we would have to accrue applicable taxes. The amount of any taxes and the application of any tax credits would be determined based on the income tax laws at the time of such repatriation. Under current tax law, we estimate the unrecognized tax liability to be immaterial.