Income Taxes

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

Income Tax (Benefit) Provision

The components of (loss) income before (benefit) provision for income taxes are as follows, in thousands:

	Years Ended September 30,
	2023			2022		2021
Domestic	$	(17,271	)	$	15,275	$	(3,320	)
Foreign		2,089			3,510		6,754
	$	(15,182	)	$	18,785	$	3,434

The components of the (benefit) provision for income taxes are as follows, in thousands:

	Years Ended September 30,
	2023			2022			2021
Current:
Domestic federal	$	—		$	—		$	—
Foreign		(327	)		711			1,999
Foreign withholding taxes		159			255			292
Domestic state		81			77			(300	)
Total current		(87	)		1,043			1,991
Deferred:
Domestic federal		(2,207	)		(39	)		—
State		(284	)		—			—
Foreign		(22	)		414			(65	)
Total deferred		(2,513	)		375			(65	)
Total (benefit) provision	$	(2,600	)	$	1,418		$	1,926

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,
	2023					2022					2021
Tax (benefit) expense at the federal statutory rate	$	(3,188	)	21.0	%	$	3,945		21.0	%	$	722		21.0	%
Effect of permanent book-tax differences		757		-5.0	%		11		0.1	%		54		1.6	%
State tax provision		(395	)	2.6	%		554		2.9	%		24		0.7	%
Valuation allowance for net deferred tax assets		1,594		-10.5	%		(3,138	)	-16.7	%		842		24.5	%
Uncertain tax items		(1,004	)	6.6	%		55		0.3	%		(276	)	-8.0	%
Tax rate differential		358		-2.4	%		535		2.8	%		267		7.8	%
Other items		(722	)	4.8	%		(544	)	-2.9	%		293		8.4	%
	$	(2,600	)	17.1	%	$	1,418		7.5	%	$	1,926		56.0	%

Deferred Income Taxes and Valuation Allowance

Deferred income taxes reflect the tax effects of temporary differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to be realized. The components of deferred tax assets and deferred tax liabilities are as follows, in thousands:

	September 30,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	17,112		$	17,180
Accruals and reserves		2,865			1,441
Foreign tax credit		1,618			811
Operating lease liabilities		2,719			2,492
Research and development costs		1,011			—
Foreign service fee		1,579			1,579
Other assets		731			467
Total deferred tax assets		27,635			23,970
Valuation allowance		(21,506	)		(20,000	)
Deferred tax assets, net of valuation allowance		6,129			3,970
Deferred tax liabilities:
Goodwill and identifiable intangible assets		(1,616	)		(321	)
Property and equipment, net		(1,356	)		(758	)
Operating lease, right-of-use assets		(2,720	)		(2,494	)
Prepaid assets		(336	)		(318	)
Total deferred tax liabilities		(6,028	)		(3,891	)
Total deferred tax assets, net	$	101		$	79

Changes in the deferred tax valuation allowance are as follows, in thousands:

	Years Ended September 30,
	2023		2022
Balance at the beginning of the year	$	20,000	$	23,292
Additions (reductions) to valuation allowance		1,506		(3,292	)
Balance at the end of the year	$	21,506	$	20,000

The deferred tax valuation allowance increased by $1.5 million and decreased by $3.3 million for the years ended September 30, 2023 and 2022, respectively. During the year ended September 30, 2023, we released of a portion of our valuation allowance in connection with a deferred tax liability related to the Entrepix acquisition.

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 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 objective evidence, and determined it is not more likely than not that these assets will be realized. We have established a partial valuation allowance on certain foreign deferred tax assets that we consider it is more likely than not will not be realized.

We intend to permanently reinvest undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the amount of tax that might be payable on the undistributed amounts.

Net Operating Losses

As of September 30, 2023, we have federal net operating loss carryforwards of approximately $9.8 million that expire at various times between 2032 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 $67.2 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, 2023. We have approximately $16.1 million of state net operating loss carryforwards, with various expiration dates and limitations on utilization, depending on the state. As of September 30, 2023, we have approximately $1.3 million of Foreign Tax Credit carryforwards that expire at various times between 2030 and 2033 and approximately $0.3 million of Federal and State Research and Development credits that expire at various times between 2029 and 2043.

Uncertain Tax Positions

We have included all of our liabilities for uncertain tax positions with income taxes payable long-term. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows, in thousands:

	Years Ended September 30,
	2023			2022		2021
Balance at beginning of the year	$	1,004		$	949	$	1,225
Additions related to tax positions taken in prior years		—			55		—
Reductions due to resolution of uncertain tax position		(1,004	)		—		(276	)
Balance at the end of the year	$	—		$	1,004	$	949

During fiscal 2023, we reversed our previous accrual of uncertain tax positions in the amount of $1.0 million. This reversal was reflected in the income tax (benefit) provision line of the Consolidated Statements of Operations. The reversal resulted from the expiration of the applicable statute of limitations.

Tax Return Matters

We 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. U.S. Federal tax returns generally have a 3-year statute of limitations. Therefore, U.S. federal returns for tax years ending on or after September 30, 2020 remain open for examination. In addition, the IRS may adjust attribute carryforwards utilized in an open year even though the year the attributes originated may be closed. State and foreign statutes are generally 3 to 5 years but vary by jurisdiction. 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.