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INCOME TAXES
 12 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES
7. INCOME TAXES
Provision for Income Taxes
Income (loss) before income taxes for the twelve months ended September 30, 2025, 2024, and 2023 is comprised of the following (amounts in thousands):
202520242023
Domestic$14,418 $10,246 $23,836 
Foreign(2,809)(11,155)(13,495)
Total$11,609 $(909)$10,341 
For the twelve months ended September 30, 2025, 2024, and 2023 the income tax benefit (provision) was as follows (amounts in thousands):
202520242023
Current:
Federal$(10,217)$(6,323)$(4,414)
State(906)(420)(1,215)
Foreign(1,266)495 (1,023)
Total current benefit (provision) for income taxes
(12,389)(6,248)(6,652)
Deferred:
Federal6,128 4,291 (659)
State548 397 819 
Foreign2,900 5,747 4,178 
Total deferred benefit (provision) for income taxes
9,576 10,435 4,338 
Total tax benefit (provision)
$(2,813)$4,187 $(2,314)
Deferred Income Tax Assets and Liabilities
Significant components of the Company’s net deferred tax assets and liabilities as of September 30, 2025 and 2024 are as follows (amounts in thousands):
20252024
Deferred tax assets:
Stock-based compensation$2,664 $2,866 
Net operating loss carryforwards11,552 12,437 
Research credit carryforwards5,311 5,398 
Lease liability717 1,235 
Accrued bonus
1,771 — 
Capitalized research and development costs12,596 8,408 
Other, net921 682 
Total deferred assets35,532 31,026 
Deferred tax liabilities:
Right of use asset(633)(1,141)
Intangibles(9,860)(13,414)
Total deferred liabilities(10,493)(14,555)
Valuation allowance for net deferred tax assets— (1,215)
Net deferred tax asset$25,039 $15,256 
The net change in the total valuation allowance for the twelve months ended September 30, 2025 and 2024 is a decrease of $1.2 million and $1.6 million, respectively due to the release of valuation allowances in certain of the Company's foreign jurisdictions in fiscal 2025 and fiscal 2024.
Evaluating the need for and the amount of a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence to determine whether it is more likely than not that these assets will be realizable. Mitek routinely assesses the positive and negative evidence for this realizability, including the evaluation of sustained profitability and three
years of cumulative pretax income for each tax jurisdiction. Based on the overall analysis of the positive and negative evidence in each tax jurisdiction, during the twelve months ended September 30, 2025 and 2024, Mitek released the valuation allowances related to certain foreign deferred tax assets. Valuation allowance releases for the year ended September 30, 2025 and 2024 resulted in recognition of a portion of these deferred tax assets and a benefit to Mitek's provision for income taxes of $1.2 million and $1.6 million, respectively.
As of September 30, 2025, the Company has no available net operating loss carryforwards for federal income tax purposes. The net operating losses for state purposes are $24.5 million, which will begin to expire in 2036. As of September 30, 2025, the Company has no available federal research and development credit carryforwards. As of September 30, 2025, the Company has available foreign net operating loss carryforwards of $39.2 million, which do not expire.
As of September 30, 2025, the Company has available California research and development credit carryforwards, net of reserves, of $3.5 million, which do not expire. As of September 30, 2025, the Company has available foreign research and development credit carryforwards of $1.7 million, which will begin to expire in 2037.
Federal and state tax attributes can be subject to an annual limitation under the provisions of Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and state tax laws. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5% stockholders in the stock of a corporation by more than 50% in the aggregate over a three-year period. In the event that we experience a change of ownership, utilization of state net operating loss and tax credit carryforwards may be limited.
Earnings from the Company's foreign subsidiaries are considered to be indefinitely reinvested. Therefore, the Company has not established a deferred tax liability on the amount of non-cash foreign undistributed earnings for the year ended September 30, 2025. However, if these non-cash undistributed earnings were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with these non-cash unremitted earnings due to the complexity of the hypothetical calculation.
Income Tax Provision Reconciliation
The difference between the income tax benefit (provision) and income taxes computed using the U.S. federal income tax rate was as follows for the twelve months ended September 30, 2025, 2024, and 2023 (amounts shown in thousands):
202520242023
Amount computed using statutory rate$(2,438)$191 $(2,172)
Net change in valuation allowance for net deferred tax assets1,049 1,696 292 
Foreign rate differential47 439 504 
Permanent differences175 190 (14)
State income tax(262)(19)(100)
Research and development credits781 1,754 791 
Contingent consideration— (28)(432)
Uncertain tax positions(220)(93)(184)
Stock compensation, net(1,935)(242)(522)
Other(10)299 (477)
Income tax (provision) benefit$(2,813)$4,187 $(2,314)
Uncertain Tax Positions
The following table reconciles the beginning and ending amount of unrecognized tax benefits for the twelve months ended September 30, 2025, 2024, and 2023 (amounts shown in thousands):
202520242023
Gross unrecognized tax benefits at the beginning of the year
$2,883 $2,985 $2,664 
Additions from tax positions taken in the current year183 253 330 
Additions from tax positions taken in prior years— — — 
Reductions from tax positions taken in prior years(24)(355)(9)
Gross unrecognized tax benefits at end of the year$3,042 $2,883 $2,985 
Of the total unrecognized tax benefits at September 30, 2025, $2.5 million will impact the Company’s effective tax rate. The Company does not anticipate that there will be a substantial change in unrecognized tax benefits within the next twelve months.
The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of September 30, 2025 and 2024, the company accrued $0.2 million and $0.1 million, respectively, of interest and penalties related to uncertain tax positions are recorded in the consolidated financial statements.
The Company is subject to periodic examinations in the U.S. by federal and state taxing authorities. All tax years are subject to examination by U.S., California, and other state tax authorities due to the utilization of carryforwards in recent years and due to the carryforward of unutilized net operating losses and tax credits. The Company is also subject to periodic examinations in the foreign countries in which it operates, however, the Company is not currently under examination by any foreign taxing authorities. For the majority of foreign tax jurisdictions, the Company is no longer subject to income tax examinations for years before 2021.
On July 4, 2025, President Trump signed into law the One, Big, Beautiful Bill Act (the “Act”). Within the Act, there were significant tax law changes with various effective dates. The tax law changes within the Act include those related to the timing of certain tax deductions including depreciation expense, research and development expenditures, and interest expense. The Company implemented the tax law changes in the fourth quarter of fiscal 2025 and, while there was no impact to its overall tax expense, the allocation between current and deferred tax expense will be impacted in the future.