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Income Taxes | 12 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9: INCOME TAXES The following table presents the components of our income before income taxes, including inter-segment amounts:
| Fiscal Year Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2022
Domestic* | $ | 82,703 |  |  | $ | 26,209 |  |  | $ | 49,937 |
Foreign | 32,905 |  |  | 25,424 |  |  | 17,776 |
| $ | 115,608 |  |  | $ | 51,633 |  |  | $ | 67,713 |
* Includes the majority of our corporate administrative costs. See Note 12: Segment Information for information pertaining to segment contribution. The following table presents the significant components of the income tax provision:
| Fiscal Year Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 20,176 |  |  | $ | 18,753 |  |  | $ | 9,465 |
State and foreign | 10,983 |  |  | 7,219 |  |  | 3,143 |
| 31,159 |  |  | 25,972 |  |  | 12,608 |
Deferred: |  |  |  |  |
Federal | (1,719) |  |  | (11,182) |  |  | 983 |
State and foreign | 3,073 |  |  | (1,620) |  |  | 3,962 |
| 1,354 |  |  | (12,802) |  |  | 4,945 |
Total income tax expense | $ | 32,513 |  |  | $ | 13,170 |  |  | $ | 17,553 |
The following table presents a reconciliation of income taxes calculated at the statutory rate and the provision for income taxes:
| Fiscal Year Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2022
Income tax expense (benefit) at the federal statutory rate | $ | 24,278 |  |  | $ | 10,843 |  |  | $ | 14,223 |
State taxes, net of federal benefit | 3,421 |  |  | 1,814 |  |  | 1,728 |
Mexico inflation adjustment | (2,154) |  |  | (1,787) |  |  | (2,089) |
Non-deductible items | 4,169 |  |  | 2,655 |  |  | 1,705 |
Foreign rate differential | 2,098 |  |  | 2,381 |  |  | 1,306 |
Change in valuation allowance | (411) |  |  | 311 |  |  | 660 |
Stock compensation | (202) |  |  | (62) |  |  | (161) |
Uncertain tax positions | (198) |  |  | (174) |  |  | (2,025) |
Foreign withholding tax | 998 |  |  | — |  |  | — |
Deferred tax true-up | 587 |  |  | (165) |  |  | 3,811 |
Dividends received deduction | (742) |  |  | (754) |  |  | (699) |
Non-deductible loss on debt restructuring | — |  |  | 1,710 |  |  | — |
U.S. GAAP/statutory book adjustments | (239) |  |  | (1,143) |  |  | — |
Other | 908 |  |  | (2,459) |  |  | (906) |
Total income tax expense | $ | 32,513 |  |  | $ | 13,170 |  |  | $ | 17,553 |
Effective tax rate | 28 | % |  | 26 | % |  | 26 | %
The following table shows significant components of our deferred tax assets and liabilities:
| September 30,
(in thousands) | 2024 |  | 2023
Deferred tax assets: |  |  |
Cash Converters | $ | 20,051 |  |  | $ | 20,364 |
Tax over book inventory | 8,595 |  |  | 8,186 |
Accrued liabilities | 7,958 |  |  | 7,689 |
Pawn service charges receivable | 3,182 |  |  | 2,764 |
Stock compensation | 1,718 |  |  | 1,645 |
Foreign tax credit | 1,696 |  |  | 1,696 |
State and foreign net operating loss carryforwards | 13,030 |  |  | 14,547 |
Book over tax depreciation | 7,052 |  |  | 7,298 |
Operating lease liabilities | 52,444 |  |  | 56,720 |
Other | 6,510 |  |  | 7,612 |
Total deferred tax assets before valuation allowance | 122,236 |  |  | 128,521 |
Valuation allowance | (15,685) |  |  | (16,885) |
Total deferred tax assets, net | 106,551 |  |  | 111,636 |
Deferred tax liabilities: |  |  |
Tax over book amortization | 31,436 |  |  | 30,906 |
Right-of-use assets, net | 49,747 |  |  | 53,366 |
Prepaid expenses | 2,086 |  |  | 2,097 |
Total deferred tax liabilities | 83,269 |  |  | 86,369 |
Net deferred tax asset | $ | 23,282 |  |  | $ | 25,267 |
As of September 30, 2024, we had state net operating loss carryforwards of approximately $5.2 million, which begin to expire in 2025 if not utilized. We also had foreign net operating loss carryforwards of $47.1 million, which will begin to expire in 2030 if not utilized. Additionally, we have a $1.7 million foreign tax credit that will expire between 2025 to 2026 if not utilized. Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. The Company has elected to account for the tax on GILTI as a period cost and therefore has not recorded deferred taxes related to GILTI on its foreign subsidiaries. As of September 30, 2024, tax in amount of $0.7 million has been accrued for estimated tax on GILTI that will be due. A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. Our valuation allowance has been established to offset certain state and foreign net operating loss carryforwards and foreign tax credit carryforwards that are not more likely than not to be utilized prior to expiration. The valuation allowance decreased by $1.2 million in fiscal 2024, primarily due to the release of valuation allowance associated with net operating losses no longer available for use. We believe our results from future operations will generate sufficient taxable income in the appropriate jurisdictions such that it is more likely than not that the remaining deferred tax assets will be realized. Deferred taxes are not provided for undistributed earnings of foreign subsidiaries of approximately $98.2 million which are intended to be reinvested outside of the U.S. Accordingly, no provision for foreign withholding taxes associated with a distribution of those earnings has been made. We estimate that, upon distribution of our share of these earnings, we would be subject to withholding taxes of approximately $5.0 million as of September 30, 2024. We provided deferred income taxes on all undistributed earnings from Cash Converters. After extensive search for multi-store acquisitions in Guatemala, in the fourth quarter of fiscal 2024, we altered our Guatemala growth strategy to a focus on organic growth of existing stores, denovos and potentially small acquisitions. As a result, we provided for applicable foreign withholding taxes on $20 million of undistributed foreign earnings and recorded a liability of $1.0 million. The following table presents a roll-forward of unrecognized tax benefits:
| Fiscal Year Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2022
Beginning balance | $ | 3,293 |  |  | $ | 3,568 |  |  | $ | 4,763 |
Increase for tax positions taken during a prior period | 223 |  |  | 396 |  |  | 547 |
Decrease for tax positions taken during a prior period | (337) |  |  | (259) |  |  | — |
Decrease for tax positions as a result of the lapse of the statute of limitations | (378) |  |  | (412) |  |  | (1,742) |
Ending balance | $ | 2,801 |  |  | $ | 3,293 |  |  | $ | 3,568 |
All of the above unrecognized tax benefits, if recognized, would impact our effective tax rate for the respective period of each ending balance. The statute of limitations will expire within the next twelve months with respect to approximately $0.7 million of foreign uncertain tax positions. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During 2024, we recognized income tax expense of $0.5 million offset by the reversal of previously accrued interest and penalties of $0.4 million due to the lapse of the statute of limitations on the associated tax position and income tax expense of $0.2 million during 2023 and an income tax benefit of $0.8 million during 2022, related to interest and penalties. The total amount of accrued interest and penalties was $0.8 million, $0.7 million and $1.0 million in 2024, 2023 and 2022, respectively. We are subject to U.S., Mexico, Canada, Guatemala, Honduras, El Salvador, Peru, United Kingdom, and the Netherlands income taxes as well as income taxes levied by various state and local jurisdictions. With few exceptions, we are no longer subject to examinations by tax authorities for years before the tax year ended September 30, 2018. We believe that adequate provisions have been made for any adjustments that may result from tax examinations.

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