Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

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Income Taxes
6 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

 

Our effective tax rate is generally higher than the statutory rate due to the geographic mix of profit among the foreign and domestic jurisdictions in which we operate. For the three months ended March 31, 2022 and 2021, we recorded income tax expense of $0.7 million and $0.5 million, respectively. For the six months ended March 31, 2022 and 2021, we recorded income tax expense of $0.8 million and $0.6 million, respectively. Tax expense for the six months ended March 31, 2021 includes a benefit of approximately $0.3 million related to the reversal of previously recorded uncertain tax positions. The quarterly income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, losses in certain jurisdictions and discrete items are excluded from the determination of the estimated annual effective tax rate.

 

GAAP requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the market environment in which the company operates and the

length of carryback and carryforward periods. According to those principles, it is difficult to conclude that a valuation allowance is not needed when the negative evidence includes cumulative losses in recent years. Based on the considerations of all available evidence, we have concluded that we will maintain a full valuation allowance for all net deferred tax assets related to the carryforwards of U.S. net operating losses and foreign tax credits. We will continue to monitor our cumulative income and loss positions in the U.S. and foreign jurisdictions to determine whether full valuation allowances on net deferred tax assets are appropriate. We expect to pay minimal U.S federal cash taxes for the foreseeable future as a result of our U.S. net operating losses that are carried forward.

 

At March 31, 2022 and September 30, 2021, the total amount of unrecognized tax benefits was approximately $1.0 million and $0.9 million, respectively. As of March 31, 2022 and September 30, 2021, we had an accrual for potential interest and penalties of approximately $0.7 million and $0.6 million, respectively, classified with income taxes payable long-term.