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Income Taxes | 12 Months Ended
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Sep. 30, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 5. Income Taxes The components of loss before income tax and income tax (benefit) expense are comprised of the following:
|  | For the Years Ended
|  | September 30,
|  | 2020 |  | 2019
|  | (Amounts in thousands)
Loss before income tax (benefit) expense |  |  |  |  |  |
U.S. |  | $ | (941) |  | $ | (663)
Foreign |  |  | (121) |  |  | 221
|  | $ | (1,062) |  | $ | (442)
Income tax (benefit) expense: |  |  |  |  |  |
Current: |  |  |  |  |  |
Federal |  | $ | (435) |  | $ | (141)
State |  |  | 21 |  |  | 122
Foreign |  |  | — |  |  | —
|  |  | (414) |  |  | (19)
Deferred: |  |  |  |  |  |
Federal |  |  | 548 |  |  | (73)
State |  |  | 250 |  |  | 21
Foreign |  |  | — |  |  | —
|  |  | 798 |  |  | (52)
|  | $ | 384 |  | $ | (71)
The effective income tax rate differed from the statutory federal income tax rate due to the following:
|  | For the Years Ended September 30, |
|  | 2020 |  | 2019 |
|  | (Dollar amounts in thousands) |
Computed “expected” tax benefit |  | $ | (225) |  | 21.2 | % | $ | (93) |  | 21.0 | %
Increases (reductions) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax benefit |  |  | (7) |  | 0.7 | % |  | (73) |  | 16.5 | %
Foreign operations |  |  | 2 |  | (0.2) | % |  | (46) |  | 10.4 | %
Permanent differences |  |  | (3) |  | 0.3 | % |  | 31 |  | (7.0) | %
Change in valuation allowance |  |  | 1,005 |  | (94.7) | % |  | 235 |  | (53.2) | %
Deferred revenue |  |  | — |  | — | % |  | (48) |  | 10.9 | %
Payable true up |  |  | — |  | — | % |  | 17 |  | (3.8) | %
Uncertain tax liability adjustment |  |  | — |  | — | % |  | (41) |  | 9.3 | %
Research and development credit |  |  | (107) |  | 10.1 | % |  | (90) |  | 20.4 | %
Benefit of US Federal NOL carryback |  |  | (222) |  | 20.9 | % |  | — |  | — | %
Other items |  |  | (59) |  | 5.5 | % |  | 37 |  | (8.4) | %
Income tax (benefit) expense |  | $ | 384 |  | (36.2) | % | $ | (71) |  | 16.1 | %
Significant components of the Company's net deferred tax assets and liabilities as of September 30, 2020 and 2019 are as follows:
|  | September 30, |  | September 30,
|  | 2020 |  | 2019
|  | (Amounts in thousands)
Deferred tax assets: |  |  |  |  |  |
Pension |  | $ | 1,410 |  | $ | 1,378
Intangibles |  |  | 94 |  |  | 81
Other reserves and accruals |  |  | 1,131 |  |  | 291
Inventory reserves and other |  |  | 684 |  |  | 619
Federal and state tax credits |  |  | 391 |  |  | 380
Federal and state net operating loss carryforwards |  |  | 3 |  |  | 928
Foreign net operating loss carryforwards |  |  | 1,766 |  |  | 1,393
Foreign exchange on intercompany loan |  |  | — |  |  | 7
Depreciation and amortization |  |  | (244) |  |  | (232)
Gross deferred tax assets |  |  | 5,235 |  |  | 4,845
Less: valuation allowance |  |  | (4,086) |  |  | (2,899)
Realizable deferred tax asset |  |  | 1,149 |  |  | 1,946
Gross deferred tax liabilities |  |  | — |  |  | —
Net deferred tax assets |  | $ | 1,149 |  | $ | 1,946
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, we consider taxable income in prior carryback years, as permitted under the tax law, our forecasted taxable earnings, tax planning strategies, and the expected timing of the reversal of temporary differences. This determination requires significant judgment, including assumptions about future taxable income that are based on historical and projected information and is performed on a jurisdiction-by-jurisdiction basis. The valuation allowance against deferred tax assets increased by approximately $1,187 thousand for the year ended September 30, 2020, which was primarily due to the recording of a partial valuation allowance against the U.S. deferred tax assets during the year. During the period ended September 30, 2020, management assessed the positive and negative evidence in the U.S. operations, and concluded that it is more likely than not that a portion of its deferred tax assets as of September 30, 2020 will not be realized in light of recent results, the COVID-19 pandemic, and the resulting economic fallout. In determining the amount of the valuation allowance to record, the Company considered taxable income in prior carryback years for U.S. federal tax purposes and the reversal of existing taxable temporary differences as sources of taxable income against which a portion of its U.S. deferred tax assets is benefitted. The Company recorded a full valuation allowance against the remaining U.S. deferred tax assets in excess of these sources of taxable income. We continue to maintain a full valuation allowance against our U.K. deferred tax assets as we have experienced cumulative losses and do not have any indication that the operation will be profitable in the future to an extent that will allow us to utilize much of our net operating loss carryforwards. To the extent that actual experience deviates from our assumptions, our projections would be affected and hence our assessment of realizability of our deferred tax assets may change. As of 2019, the Company had U.S. net operating loss carryforwards for federal purposes of approximately $2 million. Due to changes in federal tax law enacted as part of the Coronavirus Aid, Relief, and Economic Security Act during fiscal year 2020, the Company is carrying back all of its available federal net operating losses to recover federal taxes paid in prior periods. As a result, there is no federal net operating loss carryforwards as of September 30, 2020. As of September 30, 2020 and 2019, the Company had U.S. tax credit carryforwards for federal purposes of $0 and $279 thousand, respectively. The fiscal year 2020 federal R&D credit and all carried forward credits were applied to offset the current period federal tax liability. As of September 30, 2020, and 2019, the Company had U.S. net operating loss carryforwards for state purposes of approximately $76 thousand and $4.8 million, respectively, which are available to offset future taxable income through 2040. As of September 30, 2020, the Company had state tax credit carryforwards of $495 thousand available to reduce future state tax expense, of which $54 thousand has unlimited carryover status and the remainder of the credits are available through fiscal year 2035. As of September 30, 2020, the Company had U.K. net operating loss carryforwards of approximately $9.3 million that have an indefinite life with no expiration. Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $10.3 million and $11.0 million as of September 30, 2020 and 2019, respectively. The Company is considering cash distribution of undistributed foreign earnings in the future and will continue to assess the potential impact of any future distributions on U.S. taxes. The state tax impact of a distribution of foreign earnings and profits would not be material. In addition, the calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions. The Company records liabilities for estimated tax obligations in the U.S. and other tax jurisdictions. These estimated tax liabilities include the provision for taxes that may become payable in the future. As of September 30, 2020, the total amount of uncertain tax liabilities relates to state tax credit carryforwards and are all recorded net in deferred taxes. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
|  | For the Year Ended |  | For the Year Ended
|  | September 30, 2020 |  | September 30, 2019
|  | (Amounts in thousands)
Balance, beginning of year |  | $ | — |  | $ | 220
Additions for tax positions of current year |  |  | 78 |  |  | —
Additions for tax positions of prior years |  |  | 265 |  |  | —
Accrued penalties and interest |  |  | — |  |  | 13
Reversal for statute of limitations |  |  | — |  |  | (233)
Balance, end of period |  | $ | 343 |  | $ | —
We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company has reviewed the tax positions taken on returns filed domestically and in its foreign jurisdictions for all open years, generally fiscal 2017 through 2020, and believes that tax adjustments in any audited year will not be material.

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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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