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Income Taxes | 12 Months Ended
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Sep. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of the provision for income taxes of continuing operations are as follows:
|  | Year Ended September 30, |  |  |  |
|  | 2019 |  | 2018 |  | 2017
|  | (in thousands) |  |  |  |
Current tax provision (benefit): |  |  |  |  |  |
U.S. Federal |  | $ | — |  |  | $ | 108 |  |  | $ | (234) |
State |  | 453 |  |  | 714 |  |  | 613 |
Foreign |  | 611 |  |  | 795 |  |  | (210) |
|  | 1,064 |  |  | 1,617 |  |  | 169 |
Deferred tax provision (benefit): |  |  |  |  |  |
U.S. Federal |  | 103 |  |  | (6,796) |  |  | (592) |
State |  | (31) |  |  | (4,182) |  |  | (86) |
Foreign |  | 64 |  |  | 33 |  |  | 58 |
|  | 136 |  |  | (10,945) |  |  | (620) |
Total (benefit) provision |  | $ | 1,200 |  |  | $ | (9,328) |  |  | $ | (451) |
Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
|  | September 30, |  |
|  | 2019 |  | 2018
|  | (in thousands) |  |
Deferred tax assets: |  |  |  |
Net operating losses—Foreign |  | $ | 13,009 |  |  | $ | 10,163 |
Net operating losses—U.S. |  | 34,856 |  |  | 32,328 |
Accrued vacation and bonus |  | 674 |  |  | 437 |
Inventory capitalization |  | 226 |  |  | 238 |
Allowance for doubtful accounts |  | 87 |  |  | 47 |
Stock compensation expense |  | 1,989 |  |  | 3,455 |
Restructuring costs |  | 42 |  |  | 353 |
Depreciation |  | 485 |  |  | — |
Other |  | 953 |  |  | 1,158 |
Total deferred tax assets before valuation allowance |  | 52,321 |  |  | 48,179 |
Less: valuation allowance |  | (41,909) |  |  | (39,337) |
Net deferred tax assets |  | 10,412 |  |  | 8,842 |
Deferred tax liabilities: |  |  |  |  |
Amortization of intangibles |  | 408 |  |  | 204 |
Amortization of goodwill |  | 6,374 |  |  | 5,949 |
Depreciation |  | — |  |  | 37 |
Capitalized costs |  | 3,730 |  |  | 2,542 |
Pension liability |  | 482 |  |  | 556 |
Total deferred tax liabilities |  | $ | 10,994 |  |  | $ | 9,288 |
Net deferred taxes |  | $ | (582) |  |  | $ | (446) |
The reconciliation of the U.S. federal statutory rate to the effective rate for continuing operations is as follows:
|  | Year Ended September 30, |  |  |  |
|  | 2019 |  | 2018 |  | 2017
U.S. statutory rate |  | 21.0 | % |  | 24.5 | % |  | 35.0 | %
Permanent items |  | (6.8) | % |  | (1.2) | % |  | (0.9) | %
State taxes |  | (0.4) | % |  | 0.1 | % |  | 1.2 | %
Net foreign rate differential |  | (0.6) | % |  | (1.3) | % |  | (2.8) | %
Unrecognized tax benefits |  | (1.5) | % |  | (0.5) | % |  | 3.51 | %
Change in valuation allowance |  | (22.5) | % |  | (31.6) | % |  | (34.8) | %
Benefit from new Tax Act |  | — | % |  | 51.3 | % |  | — | %
Other |  | 4.2 | % |  | 3.3 | % |  | (0.1) | %
Provision for income taxes |  | (6.6) | % |  | 44.6 | % |  | 1.1 | %
At September 30, 2019 and September 30, 2018, the Company had federal and state deferred tax assets of $27.9 million and $28.4 million, respectively, related to available federal and state net operating loss (NOL) carryforwards and other U.S. deductible temporary differences. The NOL carryforwards expire beginning in 2035. At September 30, 2019 and September 30, 2018, the Company had deferred tax assets related to available foreign NOL carryforwards of $13.0 million and $10.2 million respectively. All but $0.4 million of our foreign NOLs maintain an indefinite carry forward life. The NOLs with limited carryforward periods will expire beginning in 2020. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“The Tax Act”) was signed into law. The Tax Act reduced the corporate tax rate from 35% to 21%. The rate change was administratively effective at the beginning of the Company’s 2018 fiscal year, using a blended rate of 24.5%. At September 30, 2018, the Company had not yet completed its accounting for the tax effects of the Tax Act; however, the Company recorded a provisional benefit of $10.7 million in 2018 for the remeasurement of its deferred tax balance and recognition of the realizability of its deferred tax assets. During the three months ended December 31, 2018, the Company completed its accounting for the tax effects of the Tax Act and determined no change to the amount recorded in fiscal year 2018 was required. The international provisions of the Tax Act establish a territorial tax system and subject certain foreign earnings on which U.S. tax is currently deferred to a one-time transition tax. During the three months ended December 31, 2018, the Company completed its analysis of foreign earnings and determined that no one-time transition tax was due. As a result, the Company has not recorded any impact in its financial statements for the years ended September 30, 2019 or 2018. The Tax Act subjects a U.S. shareholder to a minimum tax on "global intangible low-taxed income" ("GILTI") earned by certain foreign subsidiaries. The FASB Staff Q&A Topic 740 No. 5. Accounting for Global Intangible Low-Taxed Income states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred. The Company has elected to recognize the resulting tax on GILTI as an expense in the period the tax is incurred. The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended September 30, 2019. Such objective evidence limits the ability to consider other evidence such as our projections for future growth. On the basis of this evaluation, the Company recorded a net change to its valuation allowance of $2.6 million to bring the total valuation allowance to $41.9 million at September 30, 2019. On July 10, 2018, the Company acquired 100% of the stock of Machinio for $19.9 million. Under the acquisition method of accounting, the Company recorded a net deferred tax liability of $0.7 million comprised primarily of acquired intangibles netted against NOLs and other deferred assets and recognized a $0.7 million tax benefit from a reduction to its valuation allowance. The total amount of acquired NOLs, which are subject to limitations under Section 382, were $1.4 million. The Company has not recorded a provision for deferred U.S. tax expense on the undistributed earnings of foreign subsidiaries since the Company intends to indefinitely reinvest the earnings of these foreign subsidiaries outside the U.S. The amount of such undistributed foreign earnings was $2.8 million as of September 30, 2019. As of September 30, 2019, and 2018, $21.0 million and $14.4 million, respectively, of cash and cash equivalents was held overseas and not available to fund domestic operations without incurring taxes upon repatriation. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
|  | Year Ended September 30, (In thousands) |  |  |  |
|  | 2019 |  | 2018 |  | 2017
Beginning balance at October 1 |  | $ | — |  |  | $ | — |  |  | $ | 725 |
Additions based on positions related to the current year |  | — |  |  | — |  |  | — |
Additions for tax positions of prior years |  | 273 |  |  | 107 |  |  | 1,426 |
Reductions for tax positions of prior years |  | — |  |  | (107) |  |  | (229) |
Settlements |  | — |  |  | — |  |  | (1,922) |
Balance at September 30 |  | $ | 273 |  |  | $ | — |  |  | $ | — |
The Company applies the authoritative guidance related to uncertainty in income taxes. ASC 740 states that a benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. During 2019, the Company recorded a charge of $0.3 million for unrecognized tax benefits related to foreign operations. The Company recognizes interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions, primarily Canada and the U.K. The Company has no open income tax examinations and the statute of limitations for years prior to 2016 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal year 2016 may be adjusted upon examination by tax authorities if they are utilized.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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