|12 Months Ended|
Sep. 30, 2020
|Income Tax Disclosure [Abstract]|
|INCOME TAXES||INCOME TAXES:
The income tax (benefit) provision consisted of the following:
The U.S. Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35.0% to 21.0% effective January 1, 2018, which resulted in a blended U.S. statutory tax rate of 24.5% for the Company in fiscal 2018, and a 21.0% rate for the Company in fiscal 2019 and fiscal 2020. The Act also required a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, and created new taxes on certain foreign-sourced earnings.
Global intangible low taxed income ("GILTI"): The Act also created a new requirement that certain income earned by foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. Under U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current-period expense when incurred or to factor such amounts into the Company's measurement of its deferred taxes. The Company has made the election to treat taxes due on future inclusions related to GILTI as current period expense. The Company has calculated that no provision for GILTI tax expense was required in fiscal 2019 or fiscal 2020.
The reconciliation of the federal statutory tax rate to the consolidated effective tax rate was as follows:
The Company's consolidated income taxes for the year ended September 30, 2020 were a benefit of $18,685, compared to an expense of $806 for fiscal 2019, and a benefit of $9,118 for fiscal 2018. The difference between the Company's consolidated income taxes for fiscal 2020 versus fiscal 2019 primarily resulted from the fiscal 2020 consolidated loss before income taxes, which reflected the goodwill write-down recorded in the second quarter of fiscal 2020, which was partially non-deductible, as well as a benefit for an expected net operating loss (“NOL”) carryback. The NOL will be carried back five years allowing it to offset income that was previously taxed at a federal statutory tax rate of 35%. The Company’s fiscal 2020 effective tax rate was negatively affected by the non-deductible portion of the goodwill write-down along with certain other non-deductible expenses. The fiscal 2020 effective tax rate benefited from research and development and foreign tax credits, the reduction of uncertain tax positions due to the completion of a foreign tax audit, and the tax benefit of the NOL carryback. The increase in the fiscal 2019 effective tax rate, compared to fiscal 2018, primarily reflected the fiscal 2018 U.S. deferred tax benefit from the Act enactment, as well as a goodwill impairment in fiscal 2019 that was not tax deductible. The fiscal 2019 effective tax rate benefited from research and development and foreign tax credits and the elimination, achieved through tax planning, of a taxable basis difference.
The Company's foreign subsidiaries had loss before income taxes for the year ended September 30, 2020 and income before income taxes for the years ended September 30, 2019 and 2018 of approximately $68,343, $11,042 and $56,424, respectively. Deferred income taxes have not been provided on undistributed earnings of foreign subsidiaries since they have either been previously taxed, or are now exempt from tax, under the U.S. Tax Cuts and Jobs Act, and such earnings are considered to be reinvested indefinitely in foreign operations. At September 30, 2020, undistributed earnings of foreign subsidiaries for which deferred income taxes have not been provided approximated $383,423.
The components of deferred tax assets and liabilities at September 30, 2020 and 2019 are as follows:
At September 30, 2020, the Company had foreign net operating loss carryforwards of $101,994 and foreign capital loss carryforwards of $20,119. The Company has recorded deferred tax assets of $2,189 for state net operating loss carryforwards, which will be available to offset future income tax liabilities. If not used, state net operating losses will begin to expire in 2021. Certain of the foreign net operating losses begin to expire in 2021 while the majority of the Company's foreign net operating losses have no expiration period. Certain of these carryforwards are subject to limitations on use due to tax rules affecting acquired tax attributes, loss sharing between group members, and business continuation. Therefore, the Company has established tax-effected valuation allowances against these tax benefits in the amount of $22,527 at September 30, 2020.
Changes in the total amount of gross unrecognized tax benefits (excluding penalties and interest) are as follows:
The Company had unrecognized tax benefits of $7,066 at September 30, 2020, which would impact the annual effective tax rate. It is reasonably possible that the amount of unrecognized tax benefits could decrease by approximately $7,803 in the next 12 months primarily due to the completion of audits and the expiration of the statute of limitation related to specific tax positions.
The Company classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. Total penalties and interest accrued were $2,172 and $2,880 at September 30, 2020 and 2019, respectively. These accruals may potentially be applicable in the event of an unfavorable outcome of uncertain tax positions.
The Company is currently under examination in several tax jurisdictions and remains subject to examination until the statute of limitation expires for those tax jurisdictions.
As of September 30, 2020, the tax years that remain subject to examination by major jurisdiction generally are:
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef