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Income Taxes | 12 Months Ended
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Sep. 30, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 11. Income Taxes The following note related to income taxes includes both continuing and discontinued operations. The components of income (loss) before provision for income taxes are as follows (in thousands):
|  | Years Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Domestic |  | $ | (3,320 | ) |  | $ | (18,652 | ) |  | $ | 916 |
Foreign |  |  | 6,754 |  |  |  | 3,673 |  |  |  | (4,648 | )
|  | $ | 3,434 |  |  | $ | (14,979 | ) |  | $ | (3,732 | )
The components of the provision for income taxes are as follows (in thousands):
|  | Years Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |
Domestic federal |  | $ | — |  |  | $ | (239 | ) |  | $ | — |
Foreign |  |  | 1,999 |  |  |  | 1,407 |  |  |  | 1,278 |
Foreign withholding taxes |  |  | 292 |  |  |  | 201 |  |  |  | 94 |
Domestic state |  |  | (300 | ) |  |  | (59 | ) |  |  | 58 |
Total current |  |  | 1,991 |  |  |  | 1,310 |  |  |  | 1,430 |
Deferred: |  |  |  |  |  |  |  |  |
Foreign |  |  | (65 | ) |  |  | (566 | ) |  |  | — |
Total deferred |  |  | (65 | ) |  |  | (566 | ) |  |  | — |
Total provision |  | $ | 1,926 |  |  | $ | 744 |  |  | $ | 1,430 |
The CARES Act, which was signed into law on March 27, 2020, included a provision for a five-year carryback of net operating losses. The Company has assessed the benefit of the provision and utilized a portion of the 2019 net operating loss carryback to offset income from 2018. The income tax provision as of and for the year ended September 30, 2020 reflects such impact. Due to the tax treatment relating to the sales of SoLayTec and Tempress, we realized income tax benefits of $1.3 million and $11.1 million. We realized income tax expense of $0.2 million for the sale of R2D. The income tax benefits for SoLayTec and Tempress are reflected in our discontinued operations in 2019 and 2020, respectively. The income tax expense for R2D is reflected in our continuing operations in 2020. The income tax expense (benefit) is fully offset by a valuation allowance. A reconciliation of actual income taxes to income taxes at the expected U.S. federal corporate income tax rate is as follows (in thousands, except percentages):
|  | Years Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
Tax expense (benefit) at the federal statutory rate |  | $ | 722 |  |  | $ | (3,146 | ) |  | $ | (784 | )
Effect of permanent book-tax differences |  |  | 54 |  |  |  | 145 |  |  |  | 272 |
State tax provision |  |  | 24 |  |  |  | 34 |  |  |  | 31 |
Valuation allowance for net deferred tax assets |  |  | 842 |  |  |  | 3,775 |  |  |  | 1,682 |
Uncertain tax items |  |  | (276 | ) |  |  | (47 | ) |  |  | 74 |
Tax rate differential |  |  | 267 |  |  |  | 222 |  |  |  | 150 |
Other items |  |  | 293 |  |  |  | (239 | ) |  |  | 5 |
|  | $ | 1,926 |  |  | $ | 744 |  |  | $ | 1,430 |
Deferred income taxes reflect the tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and deferred tax liabilities are as follows (in thousands):
|  | September 30, 2021 |  |  | September 30, 2020 |
Deferred tax assets (liabilities): |  |  |  |  |  |
Capitalized inventory costs |  | $ | 103 |  |  | $ | 204 |
Inventory write-downs |  |  | 815 |  |  |  | 991 |
Accrued warranty |  |  | 78 |  |  |  | 53 |
Deferred profits |  |  | — |  |  |  | 1 |
Accruals and reserves not currently deductible |  |  | 1,827 |  |  |  | 2,913 |
Stock option expense |  |  | 832 |  |  |  | 806 |
Federal net operating loss carryforwards |  |  | 20,365 |  |  |  | 18,445 |
Foreign and state net operating losses |  |  | 285 |  |  |  | 231 |
Book vs. tax depreciation and amortization |  |  | (1,724 | ) |  |  | (1,465 | )
Foreign tax credits |  |  | 1,207 |  |  |  | — |
Other deferred tax assets |  |  | 135 |  |  |  | 120 |
Total deferred tax assets |  |  | 23,923 |  |  |  | 22,299 |
Valuation allowance |  |  | (23,292 | ) |  |  | (21,733 | )
Deferred tax assets, net of valuation allowance |  | $ | 631 |  |  | $ | 566 |
Changes in the deferred tax valuation allowance are as follows (in thousands):
|  | Years Ended September 30, |
|  | 2021 |  |  | 2020 |
Balance at the beginning of the year |  | $ | 21,733 |  |  | $ | 23,900 |
Additions (reductions) to valuation allowance |  |  | 1,559 |  |  |  | (2,167 | )
Balance at the end of the year |  | $ | 23,292 |  |  | $ | 21,733 |
The deferred tax valuation allowance increased by $1.6 million and decreased by $2.2 million for the years ended September 30, 2021 and 2020, respectively. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future income and tax planning strategies in making this assessment. We have established valuation allowances on substantially all net U.S. deferred tax assets, after considering all of the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, and determined it is not more likely than not that these assets will be realized. In 2020, we reversed a portion of the valuation allowance related to foreign deferred tax assets which we have determined will be utilized against net operating income in future years. In 2019, we reversed a portion of the valuation allowance related to net operating loss carryforwards which we had determined would be utilized against net operating income in the respective years. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full or partial valuation allowances on net deferred tax assets are appropriate. As of September 30, 2021, we have federal net operating loss carryforwards of approximately $13.0 million that expire at various times between 2031 and 2035. The utilization of those federal net operating losses is limited to approximately $0.8 million per year. Additionally, we have federal net operating loss carryforwards of approximately $84.0 million that have an indefinite carryforward period. The utilization of those federal net operating losses is limited to 80% of taxable income after 2021. We have no foreign net operating loss carryforwards as of September 30, 2021. We have approximately $22.0 million of state net operating loss carryforwards. As of September 30, 2021, we have approximately $1.2 million of Foreign Tax Credit carryforwards that expire in 2030 and 2031. We have classified all of our liabilities for uncertain tax positions as income taxes payable long-term. Income taxes payable long-term also includes other items, primarily withholding taxes that are not due until the related intercompany service fees are paid. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows (in thousands):
|  | Years Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Balance at beginning of the year |  | $ | 1,225 |  |  | $ | 1,272 |  |  | $ | 1,198 |
Additions related to tax positions taken in prior years |  |  | — |  |  |  | — |  |  |  | 74 |
Reductions due to resolution of uncertain tax position |  |  | (276 | ) |  |  | (47 | ) |  |  | — |
Balance at the end of the year |  | $ | 949 |  |  | $ | 1,225 |  |  | $ | 1,272 |
Approximately $0.3 million of our total unrecognized tax benefits represents the amount that, if recognized, would favorably affect our effective income tax rate in future periods. We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized a net (benefit) expense for interest and penalties of $(0.1) million, $4,000 and $0.1 million for 2021, 2020 and 2019, respectively. Income taxes payable long-term on the Consolidated Balance Sheets includes a cumulative accrual for potential interest and penalties of $0.6 million and $0.8 million as of September 30, 2021 and 2020. We do not expect that the amount of our tax reserves for uncertain tax positions will materially change in the next 12 months other than the continued accrual of interest and penalties. Amtech and one or more of our subsidiaries file income tax returns in China and other foreign jurisdictions, as well as the U.S. and various states in the U.S. We have not signed any agreements with the Internal Revenue Service, any state or foreign jurisdiction to extend the statute of limitations for any fiscal year. As such, the number of open years is the number of years dictated by statute in each of the respective taxing jurisdictions, but generally is from 3 to 5 years. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of Amtech and our subsidiaries.

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