Income Taxes (Notes)

12 Months Ended

Sep. 30, 2020

10. INCOME TAXES

Federal and state income tax provisions are as follows:


	Year Ended September 30,
	2020		2019		2018
Federal:
Current	$	(39)	$	(1,330)	$	(2,345)
Deferred	9,317		5,908		38,744
State:
Current	3,657		2,312		1,536
Deferred	(4,195)		(227)		216
Total provision for income taxes	$	8,740	$	6,663	$	38,151

Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate rate to income (loss) before income taxes as follows:


	Year Ended September 30,
	2020		2019		2018
Provision at the statutory rate (1)	$	10,352	$	8,430	$	5,973
Increase resulting from:
Non-deductible expenses	1,974		1,277		1,241
State income taxes, net of federal deduction	2,662		2,009		1,193
Change in valuation allowance	—		—		1,761
Rate change	—		—		31,333
Other	261		—		183
Decrease resulting from:
Share-based compensation	(75)		(556)		(238)
Change in valuation allowance	(3,334)		(83)		—
Contingent tax liabilities	(1,313)		(3,967)		(1,908)
Component 2 goodwill utilization	(1,787)		(144)		—
State deferred true up	—		—		(1,387)
Other	—		(303)		—
Total provision for income taxes	$	8,740	$	6,663	$	38,151

(1) A statutory rate of 21% was used in 2020, 21% in 2019 and 24.53% in 2018. The lower effective tax rate used in 2020 and 2019 is related to the Tax Cuts and Jobs Act enacted on December 22, 2017.

Deferred income tax provisions result from temporary differences in the recognition of income and expenses for financial reporting purposes and for income tax purposes. The income tax effects of these temporary differences, representing deferred income tax assets and liabilities, result principally from the following:


	Year Ended September 30,
	2020		2019
Deferred income tax assets:
Allowance for doubtful accounts	$	592	$	245
Accrued expenses	14,619		9,783
Net operating loss carryforward	22,623		39,045
Various reserves	1,764		1,396
Equity losses in affiliate	210		119
Share-based compensation	897		672
Capital loss carryforward	74		74
Lease asset	7,681		—
Other	2,444		1,137
Subtotal	50,904		52,471
Less valuation allowance	710		4,044
Total deferred income tax assets	50,194		48,427
Deferred income tax liabilities:
Property and equipment	517		840
Intangible assets	7,926		5,978
Lease liability	7,677		—
Other	271		735
Total deferred income tax liabilities	16,391		7,553
Net deferred income tax assets	$	33,803	$	40,874

In fiscal 2020 and 2019, the valuation allowance on our deferred tax assets decreased by $3,334 and $83, respectively, which is included in “Provision (benefit) for income taxes” in our Consolidated Comprehensive Income Statement.

As of September 30, 2020, we had available approximately $217,328 of federal net tax operating loss carry forward for federal income tax purposes, including $128,044 from net operating losses on which no tax benefit has been recognized and has not been recorded as a deferred tax asset. This carry forward, which may provide future tax benefits, will begin to expire in 2027. As of September 30, 2020, we had available approximately $76,055 state net tax operating loss carry forwards, including $6,696 from net operating losses on which no tax benefit has been recognized and has not been recorded as a deferred tax asset. The carry forwards, which may provide future tax benefits, will begin to expire in 2021. We have provided valuation allowances on all net operating losses where it is determined it is more likely than not that they will expire without being utilized.

In assessing the realizability of deferred tax assets at September 30, 2020, we considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. Our realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. As a result, we have recorded a net deferred tax asset of $33,803 on our Consolidated Balance Sheets. We will continue to evaluate the appropriateness of our remaining deferred tax assets and need for valuation allowances on a quarterly basis. Further, any future reduction in the federal statutory tax rate could result in a charge to reduce the book value of the net deferred tax assets recorded on our Consolidated Balance Sheets.

As a result of a 2006 reorganization and related adjustment to the book basis in goodwill, we have tax basis in excess of book basis in amortizable goodwill of approximately $14,539. The tax basis in amortizable goodwill in excess of book basis is not reflected as a deferred tax asset. To the extent the amortization of the excess tax basis results in a cash tax benefit, the benefit will first go to reduce goodwill, then other long-term intangible assets, and then tax expense.

GAAP requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances, but it prohibits discounting of any of the related tax effects for the time value of money. The evaluation of a tax position is a two-step process. The first step is the recognition process to determine if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit/expense to recognize in the financial statements. The tax position is measured at the largest amount of benefit/expense that is more likely than not of being realized upon ultimate settlement.

A reconciliation of the beginning and ending balances of unrecognized tax benefit is as follows:


	Year Ended September 30,
	2020		2019
Balance at beginning of period	$	26,294	$	30,256
Additions for position related to current year	111		93
Additions for positions of prior years	29		19
Reduction resulting from the lapse of the applicable statutes of limitations	1,573		4,074


Balance at end of period	$	24,861	$	26,294

As of September 30, 2020, and 2019, $24,861 and $26,294, respectively, of unrecognized tax benefits would result in a decrease in the provision for income tax expense. We anticipate that approximately $3,061 in liabilities for unrecognized tax benefits, including accrued interest, primarily from net operating losses on which no tax benefit has been recognized, may be reversed in the next twelve months. The reversal is predominately due to the expiration of the statutes of limitation for unrecognized tax benefits.

We had approximately $55 and $43 accrued for the payment of interest and penalties at September 30, 2020, and 2019, respectively. We recognize interest and penalties related to unrecognized tax benefits as part of the provision for income taxes.

The tax years ended September 30, 2017, and forward are subject to federal audit as are tax years prior to September 30, 2017, to the extent of unutilized net operating losses generated in those years. The tax years ended September 30, 2017, and forward are subject to state audits as are tax years prior to September 30, 2017, to the extent of unutilized net operating losses generated in those years.