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Income Taxes | 12 Months Ended
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Sep. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 8. Income Taxes Income taxes from continuing operations in the accompanying consolidated statements of income for the fiscal years ended September 30 are as follows (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Current provision: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 2,125 |  |  | $ | 6,550 |  |  | $ | 6,065 |
U.S. State |  |  | (72 | ) |  |  | 250 |  |  |  | 106 |
International |  |  | 54 |  |  |  | (98 | ) |  |  | 30 |
Total current provision |  |  | 2,107 |  |  |  | 6,702 |  |  |  | 6,201 |
Deferred provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | 1,085 |  |  |  | 169 |  |  |  | 58 |
U.S. State |  |  | (85 | ) |  |  | (43 | ) |  |  | 35 |
International |  |  | — |  |  |  | 135 |  |  |  | — |
Total deferred provision (benefit) |  |  | 1,000 |  |  |  | 261 |  |  |  | 93 |
Total provision |  | $ | 3,107 |  |  | $ | 6,963 |  |  | $ | 6,294 |
The reconciliation of the difference between amounts calculated at the statutory U.S. federal tax rate of 35% for the fiscal years ended September 30 and the Company’s effective tax rate from continuing operations is as follows (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Amount at statutory U.S. federal income tax rate |  | $ | 2,461 |  |  | $ | 5,932 |  |  | $ | 6,385 |
Change because of the following items: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal benefit |  |  | (13 | ) |  |  | 142 |  |  |  | 67 |
Stock-based compensation |  |  | 330 |  |  |  | (607 | ) |  |  | 16 |
Valuation allowance change |  |  | 665 |  |  |  | (2,500 | ) |  |  | 348 |
Tax reserve change |  |  | (52 | ) |  |  | 258 |  |  |  | 34 |
Federal manufacturing deduction |  |  | (313 | ) |  |  | (280 | ) |  |  | (268 | )
U.S. Federal and foreign research and development credits |  |  | (706 | ) |  |  | (571 | ) |  |  | (74 | )
Gain on strategic investment and corporate subsidiary |  |  | — |  |  |  | 2,630 |  |  |  | — |
Foreign rate differential |  |  | 948 |  |  |  | 622 |  |  |  | — |
Acquisition-related transaction costs |  |  | — |  |  |  | 768 |  |  |  | — |
Contingent consideration (gain) expense |  |  | (45 | ) |  |  | 522 |  |  |  | — |
Unrealized foreign currency exchange loss on contingent consideration obligation |  |  | 170 |  |  |  | — |  |  |  | — |
Other |  |  | (338 | ) |  |  | 47 |  |  |  | (214 | )
Income tax provision |  | $ | 3,107 |  |  | $ | 6,963 |  |  | $ | 6,294 |
The federal research and development tax credit for fiscal 2016 and 2015 includes the benefit generated for the periods from October 1, 2015 to December 31, 2015, October 1, 2014 to December 31, 2014 and October 1, 2013 to December 31, 2013, respectively, prior to the expiration of the benefit in each period. During fiscal 2016, the Company utilized $7.5 million of capital losses generated in prior years by accelerating built-in gains in the Company’s IVD subsidiary. For tax purposes, this resulted in an increase in the Company’s tax basis in the IVD subsidiary and a $2.6 million reduction in both deferred tax assets and the valuation allowance as of September 30, 2016. Excess tax benefits (shortfalls) related to stock based compensation expense are recorded within income tax expenses in the consolidated statements of income and totaled $(0.2) million and $0.6 million for the years ended September 30, 2017 and 2016, respectively. During fiscal 2015, under accounting guidance then in effect, excess tax benefits totaling $0.4 were recorded in additional paid-in capital. The components of deferred income taxes consisted of the following as of September 30 and result from differences in the recognition of transactions for income tax and financial reporting purposes (in thousands):
|  | 2017 |  |  | 2016 |
Depreciable assets |  | $ | (3,335 | ) |  | $ | (2,257 | )
Accruals and reserves |  |  | 1,123 |  |  |  | 1,153 |
Stock-based compensation |  |  | 3,370 |  |  |  | 3,113 |
Impaired strategic investments |  |  | 2,701 |  |  |  | 2,701 |
NOL carryforwards |  |  | 3,627 |  |  |  | 3,324 |
U.S. Federal and state R&D credits |  |  | 242 |  |  |  | 110 |
Other |  |  | 810 |  |  |  | 730 |
Valuation allowance |  |  | (4,511 | ) |  |  | (3,847 | )
Total deferred tax assets |  | $ | 4,027 |  |  | $ | 5,027 |
As of September 30, 2017 and 2016, the Company recorded deferred tax asset valuation allowances of $4.5 million and $3.9 million, respectively. The valuation allowances are primarily related to other-than-temporary impairment losses on strategic investments, state R&D credit carryforwards, and net operating loss carryforwards of Creagh Medical. As of September 30, 2017, the Company had federal and Minnesota R&D credit carryforwards of $0.3 million that will begin expiring in 2029 and state net operating loss carryforwards $0.2 million that will begin expiring in 2022. The Ireland and Luxembourg net operating loss carryforward assets totaling $3.0 million, much of which was acquired as part of the Creagh Medical acquisition in fiscal 2016, have an unlimited carryforward period. The U.S. federal and Minnesota net operating losses acquired as part of the NorMedix, Inc. acquisition are subject to the IRC Section 382 limitation rules. The Company has projected that these losses will be utilized with over the ten years remaining in the carryforward period. Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for accounting purposes pursuant to accounting guidance. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Beginning of fiscal year |  | $ | 1,508 |  |  | $ | 1,248 |  |  | $ | 1,216 |
Increases in tax positions for prior years |  |  | 8 |  |  |  | 77 |  |  |  | 50 |
Decreases in tax positions for prior years |  |  | (35 | ) |  |  | (21 | ) |  |  | (10 | )
Increases in tax positions for current year |  |  | 216 |  |  |  | 365 |  |  |  | 146 |
Lapse of the statute of limitations |  |  | (216 | ) |  |  | (161 | ) |  |  | (154 | )
End of fiscal year |  | $ | 1,481 |  |  | $ | 1,508 |  |  | $ | 1,248 |
The total amount of unrecognized tax benefits excluding interest and penalties that, if recognized, would affect the effective tax rate as of September 30, 2017, 2016 and 2015, respectively, are $1.2 million, $1.2 million and $0.9 million. Currently, the Company does not expect the liability for unrecognized tax benefits to change significantly in the next 12 months and has classified the above balances on the consolidated balance sheets in other long-term liabilities. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. As of September 30, 2017, 2016 and 2015, a gross balance of $0.5 million, $0.6 million and $0.6 million, respectively, has been accrued related to the unrecognized tax benefits balance for interest and penalties. The Company files income tax returns, including returns for its subsidiaries, in the U.S. federal jurisdiction and in various state jurisdictions as well as several non-U.S. jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. The Internal Revenue Service (“IRS”) commenced an examination of the Company’s fiscal 2016 U.S. federal income tax return in the fourth quarter of fiscal 2017. The examination has not been completed. U.S. federal income tax returns for years prior to fiscal 2013 are no longer subject to examination by federal tax authorities. For tax returns for state and local jurisdictions, the Company is no longer subject to examination for tax years generally before fiscal 2007. For tax returns for non-U.S. jurisdictions, the Company is no longer subject to income tax examination for years prior to 2012. Additionally, the Company has been indemnified of liability for any taxes relating to Creagh Medical and NorMedix for periods prior to the respective acquisition dates, pursuant to the terms of the related share purchase agreements. As of September 30, 2017 and 2016, there were no undistributed earnings in foreign subsidiaries.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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