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Income Taxes | 12 Months Ended
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Sep. 30, 2021
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,
|  | 2021 |  | 2020 |  | 2019
|  | (in thousands)
Current tax provision (benefit): |  |  |  |  |  |
U.S. Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  | 293 |  |  | 382 |  |  | 453 |
Foreign |  | 847 |  |  | 313 |  |  | 611 |
|  | 1,140 |  |  | 695 |  |  | 1,064 |
Deferred tax provision (benefit): |  |  |  |  |  |
U.S. Federal |  | (23,315) |  |  | 74 |  |  | 103 |
State |  | (1,252) |  |  | (27) |  |  | (31) |
Foreign |  | 57 |  |  | 59 |  |  | 64 |
|  | (24,510) |  |  | 106 |  |  | 136 |
Total (benefit) provision |  | $ | (23,370) |  |  | $ | 801 |  |  | $ | 1,200 |
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,
|  | 2021 |  | 2020
|  | (in thousands)
Deferred tax assets: |  |  |  |
Net operating losses—Foreign |  | $ | 13,593 |  |  | $ | 12,709 |
Net operating losses—U.S. |  | 31,456 |  |  | 35,126 |
Accrued vacation and bonus |  | 678 |  |  | 571 |
Inventory capitalization |  | 219 |  |  | 54 |
Allowance for doubtful accounts |  | 96 |  |  | 65 |
Stock compensation expense |  | 1,415 |  |  | 1,804 |
Operating lease assets |  | 3,605 |  |  | 2,236 |
Depreciation |  | 2,339 |  |  | 1,266 |
Other |  | 897 |  |  | 893 |
Total deferred tax assets before valuation allowance |  | 54,298 |  |  | 54,724 |
Less: valuation allowance |  | (13,813) |  |  | (41,788) |
Net deferred tax assets |  | 40,485 |  |  | 12,936 |
Deferred tax liabilities: |  |  |  |
Amortization of intangibles |  | 107 |  |  | 291 |
Amortization of goodwill |  | 7,322 |  |  | 6,666 |
Capitalized costs |  | 5,602 |  |  | 4,470 |
Operating lease liabilities |  | 3,394 |  |  | 2,059 |
Pension liability |  | 238 |  |  | 138 |
Total deferred tax liabilities |  | $ | 16,663 |  |  | $ | 13,624 |
Net deferred taxes |  | $ | 23,822 |  |  | $ | (688) |
The reconciliation of the U.S. federal statutory rate to the effective rate for continuing operations is as follows:
|  | Year Ended September 30,
|  | 2021 |  | 2020 |  | 2019
U.S. statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Stock-based stock compensation expense |  | (14.1) | % |  | (14.9) | % |  | (2.0) | %
Nondeductible compensation expense |  | 5.5 | % |  | (6.0) | % |  | (0.6) | %
Other permanent items |  | 0.1 | % |  | (1.1) | % |  | (4.2) | %
State taxes |  | 3.0 | % |  | (13.2) | % |  | (0.4) | %
Net foreign rate differential |  | 0.5 | % |  | (0.8) | % |  | (0.6) | %
Unrecognized tax benefits |  | 0.1 | % |  | 5.1 | % |  | (1.5) | %
Change in valuation allowance |  | (98.9) | % |  | 9.9 | % |  | (22.5) | %
Write-down of deferred tax assets on share-based stock compensation |  | 0.7 | % |  | (12.3) | % |  | (7.9) | %
Write-down of deferred tax assets on net operating loss |  | (2.8) | % |  | (15.9) | % |  | 10.6 | %
Other |  | 0.2 | % |  | 1.3 | % |  | 1.5 | %
Effective rate |  | (84.7) | % |  | (26.9) | % |  | (6.6) | %
As of September 30, 2021 and 2020, the Company had federal and state deferred tax assets of $23.5 million and $27.7 million, respectively, related to available federal and state net operating loss (NOL) carryforwards, foreign tax credit carryforwards, and other U.S. deductible temporary differences. The federal and state NOL carryforwards expire beginning in 2035 and 2022, respectively. The Company's ability to use these various carryforwards to offset any taxable income generated in future taxable periods may be limited under Section 382 and other federal tax provisions. The foreign tax credit carryforwards expire beginning in 2023. At September 30, 2021 and 2020, the Company had deferred tax assets related to available foreign NOL carryforwards of $13.6 million and $12.7 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 2022. The Company evaluates the recoverability of its deferred tax assets on a jurisdictional basis by considering whether deferred tax assets will be realized on a more likely than not basis. To the extent a portion or all of the applicable deferred tax assets do not meet the more likely than not threshold, a valuation allowance is recorded. Consideration was given to the tax planning strategies and, when applicable, future taxable income as to how much of the relevant deferred tax asset could be realized on a more likely than not basis. The Company has recorded a valuation allowance of $13.8 million and $41.8 million against its gross deferred tax asset balance at September 30, 2021 and September 30, 2020, respectively. At each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of September 30, 2021, in part because in the current year we achieved three years of cumulative pre-tax income in the U.S. federal jurisdiction, the Company determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred tax assets of $27.9 million are realizable. It therefore recorded a net valuation allowance release of $27.9 million for the year ended September 30, 2021. On March 27, 2020, The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the Pandemic. The CARES Act, among other things, accelerates the recovery of alternative minimum tax (AMT) credits into fiscal year 2020. During fiscal year 2020, the Company recovered its full AMT refund of $1.7 million. Prior to the CARES Act, the Company’s AMT credits were recoverable in fiscal years 2021 through 2023. The CARES Act also permits net operating loss (NOL) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, NOLs incurred in fiscal years 2019, 2020, and 2021 may be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company does not expect the NOL provisions of the CARES Act to result in a material cash benefit. The Tax Act and Jobs Act of 2017 ("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. 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 $6.9 million as of September 30, 2021. As of September 30, 2021, and 2020, $22.4 million and $19.5 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 (in thousands):
|  | Year Ended September 30,
|  | 2021 |  | 2020 |  | 2019
Beginning balance at October 1 |  | $ | 123 |  |  | $ | 273 |  |  | $ | — |
Additions based on positions related to the current year |  | 20 |  |  | — |  |  | — |
Additions for tax positions of prior years |  | — |  |  | — |  |  | 273 |
Reductions for tax positions of prior years |  | — |  |  | (150) |  |  | — |
Settlements |  | — |  |  | — |  |  | — |
Balance at September 30 |  | $ | 143 |  |  | $ | 123 |  |  | $ | 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 2021, the Company recorded a charge of $0.1 million due to 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 in the U.S. and the statute of limitations for years prior to 2018 is now closed. However, certain tax attribute carryforwards that were generated prior to fiscal year 2018 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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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