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Income Taxes: | 12 Months Ended
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Sep. 30, 2014
Income Taxes: |
Income Taxes: | 11. Income Taxes: The components of income taxes are as follows:
|  | For the Fiscal Year Ended September 30, |
|  | 2014 |  | 2013 |  | 2012 |
Current provision (benefit): |  |  |  |  |  |  |
Federal |  | $ | 614,729 |  | $ | 432,211 |  | $ | 46,792 |
State |  | 363 |  | (2,731 | ) | (9,476 | )
Total current provision |  | 615,092 |  | 429,480 |  | 37,316 |
Deferred (benefit) provision: |  |  |  |  |  |  |
Federal |  | (857,049 | ) | (255,154 | ) | (2,435,049 | )
State |  | (41,665 | ) | (54,484 | ) | 670 |
Total deferred (benefit) provision |  | (898,714 | ) | (309,638 | ) | (2,434,379 | )
Total current and deferred (benefit) provision |  | $ | (283,622 | ) | $ | 119,842 |  | $ | (2,397,063 | )
Following is a reconciliation of the statutory federal rate to the Company’s effective income tax rate:
|  | For the Fiscal Year Ended September 30, |
|  | 2014 |  | 2013 |  | 2012 |
U.S. Federal statutory tax rate |  | 34.0 | % | 34.0 | % | 34.0 | %
State income taxes, net of federal benefit |  | 29.6 | % | (1.3 | )% | 6.5 | %
Permanent items, principally Section 199 manufacturing deduction |  | 123.9 | % | (2.9 | )% | (1.8 | )%
Research and development tax credits |  | 190.4 | % | (27.4 | )% | (3.6 | )%
Valuation allowance |  | 3.9 | % | (0.8 | )% | (433.5 | )%
Change in unrecognized tax benefits |  | (41.5 | )% | 4.4 | % | (13.5 | )%
Effective income tax rate |  | 340.3 | % | 6.0 | % | (411.9 | )%
On January 1, 2013, Congress enacted the American Taxpayer Relief Act of 2012 which retroactively reinstated and extended the Research and Development Tax Credit (“R&D Tax Credit”) from January 1, 2012 to December 31, 2013. Congress has not extended the R&D Tax Credit beyond December 31, 2013. The Company’s effective income tax rate in fiscal 2014 reflects an R&D Tax Credit for the three months ended December 31, 2013. The fiscal year 2013 effective income tax rate reflects the benefit of the retroactive application of the R&D Tax Credit for nine months from the fiscal year ended September 30, 2012, plus a full year benefit for the fiscal year ended September 30, 2013, as required by ASC Topic 740. The deferred tax effect of temporary differences giving rise to the Company’s deferred tax assets and liabilities consists of the components below:
|  | As of September 30, |
|  | 2014 |  | 2013 |
|  | Current |  | Non Current |  | Current |  | Non Current |
Deferred tax assets: |  |  |  |  |  |  |  |  |
Reserves and accruals |  | $ | 2,880,747 |  | $ | 170,562 |  | $ | 1,657,601 |  | $ | 196,312 |
Research and development credit |  | 396,276 |  | 208,384 |  | 349,195 |  | 548,952 |
NOL carryforwards - state |  | 5,500 |  | 1,237,553 |  | 1,600 |  | 1,246,615 |
Stock options |  |  |  | 630,160 |  | — |  | 714,040 |
Depreciation |  |  |  | (795,050 | ) |  |  | (626,063 | )
Other |  |  |  | 4,105 |  | — |  | 4,023 |
|  | 3,282,523 |  | 1,455,714 |  | 2,008,396 |  | 2,083,879 |
Less: Valuation allowance |  | (37,300 | ) | (1,398,007 | ) | (5,717 | ) | (1,432,881 | )
Total deferred tax assets |  | 3,245,223 |  | 57,707 |  | 2,002,679 |  | 650,998 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |
Depreciation |  | — |  | (132,999 | ) | — |  | (132,202 | )
Other |  | — |  | — |  | — |  | — |
Total deferred tax liabilities |  | — |  | (132,999 | ) | — |  | (132,202 | )
Net deferred tax asset (liability) |  | $ | 3,245,223 |  | $ | (75,292 | ) | $ | 2,002,679 |  | $ | 518,796 |
At September 30, 2014, the Company had state NOL carryforwards of $21.2 million, which begin to expire in varying amounts after the fiscal year ending September 30, 2026. In addition, the Company has federal R&D Tax Credit carryforwards of approximately $396,000, which begin to expire in varying amounts after fiscal year ending September 30, 2029, and state R&D Tax Credit carryforwards of $208,000 (net of federal impact), which begin to expire in varying amounts after the fiscal year ending September 30, 2023. Deferred tax assets are reduced by valuation allowances if, based on the consideration of all available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. Significant weight is given to evidence that can be verified objectively, and significant management judgment is required in determining any valuation allowances recorded against net deferred tax assets. The Company evaluates deferred income taxes on a quarterly basis to determine if valuation allowances are required by considering available evidence, including historical and projected taxable income and tax planning strategies which are both prudent and feasible. ASC Topic 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against net deferred tax assets At September 30, 2014 and 2013, the balance of the deferred tax valuation allowance relates principally to NOLs of certain state taxing jurisdictions. The valuation allowance decreased by $3,000 and $16,000 for the years ended September 30, 2014 and 2013 respectively, primarily because of the partial reversal of state valuation allowances related to state NOLs and other deferred tax assets, based on forecasts of future taxable income. If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes. The Company will continue to maintain the balance of the valuation allowance until an appropriate level of profitability is sustained to warrant a conclusion that it is no longer more likely than not that a portion of these net deferred tax assets will not be realized in future periods. There is currently no assurance of such future income before taxes. The Company believes that its estimate of future taxable income is inherently uncertain, and if its current or future operations generate losses, further adjustments to the valuation allowance are possible. At September 30, 2012, the Company considered all available evidence, including the recent history of income before income taxes, together with projections of profitability in future periods. As a result of this analysis, the Company determined that the positive evidence, which related primarily to the recent history of income before income taxes, and projections of future profits, was sufficient to conclude that it was appropriate to reverse $2.4 million of valuation allowances previously recorded against its net federal deferred tax assets. Following is a reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits:
|  | For the Fiscal Year Ended September 30, |
|  | 2014 |  | 2013 |  | 2012 |
Balance at beginning of year |  | $ | 492,000 |  | $ | 403,000 |  | $ | 491,000 |
Unrecognized tax benefits related to prior years |  | 1,500 |  | — |  | — |
Unrecognized tax benefits related to current year |  | 32,500 |  | 120,000 |  | 12,000 |
Decrease in unrecognized tax benefits due to the lapse of applicable statute of limitations |  | — |  | (31,000 | ) | (100,000 | )
Balance at end of year |  | $ | 526,000 |  | $ | 492,000 |  | $ | 403,000 |
The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $526,000, $492,000 and $403,000 at September 30, 2014, 2013 and 2012, respectively. It is not anticipated that the balance of unrecognized tax benefits at September 30, 2014 will change significantly over the next twelve months. The balance of unrecognized tax benefits as reflected in the table above at September 30, 2014 and 2013 are recorded on the balance sheet as a reduction to deferred tax assets, except for approximately $10,000 which is included in Other Liabilities at September 30, 2014 and 2013, respectively. The Company’s policy is to recognize interest accrued and, if applicable, penalties related to unrecognized tax benefits in income tax expense for all periods presented. The Company has accrued approximately $1,000 for the payment of interest, net of tax benefits, at September 30, 2014 and 2013, respectively. There is no accrual recorded for penalties. For the fiscal year ended September 30, 2014, 2013 and 2012, the Company recognized expense (benefit) of $0, $(3,000) and $(8,000), respectively, for interest (net of federal impact) within income tax expense. The Company is subject to income taxes in the U.S. federal and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of related tax laws and regulations and require significant judgment to apply. The Company’s federal income tax returns for the fiscal years ended September 30, 2011 and thereafter are open years subject to examination by the Internal Revenue Service (“IRS”). The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation. During fiscal year 2012, the IRS examined the Company’s income tax return for the year ended September 30, 2010, and no adjustments resulted from this examination. There are no state income tax examinations in process at this time. On September 13, 2013, the U.S. Treasury Department and the IRS issued final regulations that address costs incurred in acquiring, producing, or improving tangible property (the “tangible property regulations”). The tangible property regulations are generally effective for tax years beginning on or after January 1, 2014, and may be adoptedin earlier years. The tangible property regulations will require the Company to make additional tax accounting method changes as of October 1, 2014; however, management does not anticipate the impact of these changes to be material to the Company’s consolidated financial position, its consolidated statements of income, or both.

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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 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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