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Income Taxes | 12 Months Ended
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Sep. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 8. Income Taxes Income taxes from continuing operations in the accompanying consolidated statements of operations for the years ended September 30 are as follows (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 1,355 |  |  | $ | (890 | ) |  | $ | 2,125 |
U.S. State |  |  | 192 |  |  |  | 51 |  |  |  | (72 | )
International |  |  | 41 |  |  |  | 41 |  |  |  | 54 |
Total current provision (benefit) |  |  | 1,588 |  |  |  | (798 | ) |  |  | 2,107 |
Deferred provision (benefit): |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | (1,505 | ) |  |  | (2,006 | ) |  |  | 1,085 |
U.S. State |  |  | (117 | ) |  |  | (271 | ) |  |  | (85 | )
International |  |  | — |  |  |  | — |  |  |  | — |
Total deferred (benefit) provision (1) |  |  | (1,622 | ) |  |  | (2,277 | ) |  |  | 1,000 |
Total (benefit) provision |  | $ | (34 | ) |  | $ | (3,075 | ) |  | $ | 3,107 |
Both the current and deferred benefit include the impact of the adoption of ASC Topic 606 in fiscal 2019, which reduced deferred income taxes and income taxes receivable by $1.2 million and $0.4 million, respectively. In December 2017, the Tax Cuts and Jobs Act (“TCJA”) tax legislation was signed into law, which reduced the U.S. Federal statutory tax rate from 35% to 21%, among other changes. As of September 30, 2019, the Company has fully completed its accounting for the tax effects of the enactment of the TCJA. The fiscal 2018 tax provision includes discrete tax expense of $1.6 million from the revaluation of the Company’s net deferred tax assets based on the enacted tax rate of 21%, as compared with the previous rate of 35%. U.S. tax law requires that taxpayers with a fiscal year beginning before and ending after the effective date of a rate change calculate a blended tax rate for the year based on the pro rata number of days in the year before and after such effective date. As a result, for the fiscal year ended September 30, 2018, our U.S. federal statutory income tax rate was 24.5%. The reconciliation of the difference between amounts calculated at the statutory U.S. federal tax rate of 21%, 24.5% and 35% for fiscal 2019, 2018 and 2017, respectively, and the Company’s effective tax rate from continuing operations is as follows (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Amount at statutory U.S. federal income tax rate |  | $ | 1,587 |  |  | $ | (1,845 | ) |  | $ | 2,461 |
Change because of the following items: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal benefit |  |  | (452 | ) |  |  | (724 | ) |  |  | (13 | )
U.S. Federal and foreign research and development credits |  |  | (2,464 | ) |  |  | (1,710 | ) |  |  | (706 | )
Foreign and state rate differential |  |  | 156 |  |  |  | 371 |  |  |  | 948 |
Valuation allowance change |  |  | 671 |  |  |  | 960 |  |  |  | 665 |
Stock-based compensation (1) |  |  | (163 | ) |  |  | (2,063 | ) |  |  | 330 |
Contingent consideration (gain) expense and related foreign currency revaluation |  |  | (61 | ) |  |  | 142 |  |  |  | 125 |
U.S. Federal and state rate change |  |  | 44 |  |  |  | 1,582 |  |  |  | — |
Tax reserve change |  |  | 770 |  |  |  | 158 |  |  |  | (52 | )
Foreign-derived income deduction |  |  | (150 | ) |  |  | — |  |  |  | — |
Federal manufacturing deduction |  |  | — |  |  |  | — |  |  |  | (313 | )
Other |  |  | 28 |  |  |  | 54 |  |  |  | (338 | )
Income tax provision |  | $ | (34 | ) |  | $ | (3,075 | ) |  | $ | 3,107 |
| (1) | Includes non-deductible stock-based compensation.
Excess tax benefits (shortfalls) related to stock based compensation expense are recorded within income tax benefit (expense) in the consolidated statements of operations and totaled $0.5 million, 2.0 million and $($0.2) million for the fiscal years ended September 30, 2019, 2018 and 2017, respectively. 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):
|  | 2019 |  |  | 2018 |
Depreciable assets |  | $ | (905 | ) |  | $ | (1,019 | )
Deferred revenue |  |  | 1,554 |  |  |  | — |
Accruals and reserves |  |  | 585 |  |  |  | 1,308 |
Stock-based compensation |  |  | 2,213 |  |  |  | 1,798 |
Impaired strategic investments |  |  | 1,666 |  |  |  | 1,687 |
NOL carryforwards |  |  | 3,308 |  |  |  | 4,637 |
U.S. Federal and state R&D credits |  |  | 2,394 |  |  |  | 1,896 |
Other |  |  | 689 |  |  |  | 538 |
Valuation allowance |  |  | (5,328 | ) |  |  | (4,541 | )
Total deferred tax assets |  | $ | 6,176 |  |  | $ | 6,304 |
As of September 30, 2019 and 2018, the Company recorded deferred tax asset valuation allowances of $5.3 million and $4.5 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, 2019, the Company had federal and state R&D credit carryforwards of $2.4 million that will begin expiring in 2029 and federal and state net operating loss carryforwards of $0.2 million and $0.2 million that will begin expiring in 2034 and 2022, respectively. Ireland 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 acquisition are subject to the IRC Section 382 limitation rules. The Company has projected that these loss carryforwards will be utilized with over the nine 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):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Beginning of fiscal year |  | $ | 1,559 |  |  | $ | 1,481 |  |  | $ | 1,508 |
Increases in tax positions for prior years |  |  | 278 |  |  |  | 61 |  |  |  | 8 |
Decreases in tax positions for prior years |  |  | (2 | ) |  |  | — |  |  |  | (35 | )
Increases in tax positions for current year |  |  | 735 |  |  |  | 735 |  |  |  | 216 |
Settlements with taxing authorities |  |  | — |  |  |  | (613 | ) |  |  | — |
Lapse of the statute of limitations |  |  | (247 | ) |  |  | (105 | ) |  |  | (216 | )
End of fiscal year |  | $ | 2,323 |  |  | $ | 1,559 |  |  | $ | 1,481 |
The total amount of unrecognized tax benefits excluding interest and penalties that, if recognized, would affect the effective tax rate as of September 30, 2019, 2018 and 2017, respectively, are $2.1 million, $1.4 million and $1.2 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, 2019, 2018 and 2017, a gross balance of $0.5 million, $0.4 million and $0.5 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”) completed an examination of our fiscal 2016 U.S. federal income tax return in the third quarter of fiscal 2018, with a payment made associated primarily with timing adjustments. U.S. federal income tax returns for years prior to fiscal 2015 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, 2019 and 2018, 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://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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