13. Income Taxes
Income before income taxes for all periods presented is from domestic operations, which are the Company’s only operations. During the years ended September 30, 2017, 2016, and 2015, the Company recorded income tax expense as follows:
|
|
|
Years Ended September 30, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(in thousands) |
|
|||||||||
|
Current income tax (expense) benefit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(10,078 |
) |
|
$ |
(12,233 |
) |
|
$ |
(35,040 |
) |
|
State |
|
|
(813 |
) |
|
|
(956 |
) |
|
|
(2,172 |
) |
|
Deferred income tax (expense) benefit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
1,503 |
|
|
|
2,136 |
|
|
|
(7,371 |
) |
|
State |
|
|
151 |
|
|
|
159 |
|
|
|
(1,880 |
) |
|
|
|
$ |
(9,237 |
) |
|
$ |
(10,894 |
) |
|
$ |
(46,463 |
) |
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate is as follows:
|
|
|
Years Ended September 30, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Federal statutory income tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
State taxes, net of federal benefit |
|
|
2.7 |
|
|
|
2.7 |
|
|
|
2.6 |
|
|
Federal research and development tax credit |
|
|
(7.4 |
) |
|
|
(3.8 |
) |
|
|
(0.1 |
) |
|
Share-based compensation |
|
|
4.5 |
|
|
|
2.6 |
|
|
|
0.5 |
|
|
Change in statutory rate |
|
— |
|
|
— |
|
|
|
0.3 |
|
||
|
Other |
|
|
(0.5 |
) |
|
|
(3.0 |
) |
|
|
(1.3 |
) |
|
Effective income tax rate |
|
|
34.3 |
% |
|
|
33.5 |
% |
|
|
37.0 |
% |
Net deferred tax assets as of September 30, 2017 and 2016 consisted of the following:
|
|
|
September 30, |
|
|||||
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in thousands) |
|
|||||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
$ |
7,899 |
|
|
$ |
4,919 |
|
|
Capitalized research and development expenses |
|
|
1,199 |
|
|
|
2,052 |
|
|
Other temporary differences |
|
|
2,172 |
|
|
|
1,498 |
|
|
Unrealized loss |
|
|
67 |
|
|
|
— |
|
|
Total deferred tax assets |
|
|
11,337 |
|
|
|
8,469 |
|
|
Valuation allowance |
|
|
— |
|
|
|
— |
|
|
Net deferred tax assets |
|
|
11,337 |
|
|
|
8,469 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
(1,026 |
) |
|
|
(68 |
) |
|
Prepaid expenses |
|
|
(188 |
) |
|
|
— |
|
|
Unrealized gain |
|
|
— |
|
|
|
(11 |
) |
|
Total deferred tax liabilities |
|
|
(1,214 |
) |
|
|
(79 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax assets (liabilities) |
|
$ |
10,123 |
|
|
$ |
8,390 |
|
The net deferred tax asset is presented as a long-term asset on the consolidated balance sheets.
After consideration of all the evidence, both positive and negative, the Company determined that no valuation allowance is needed for all or a portion of its deferred tax assets as of September 30, 2017 because it is more likely than not that the deferred tax assets will be realized. In subsequent periods, the Company may determine that it is more likely than not that the deferred tax assets will not be realized and thus, a valuation allowance may be recorded against all or any portion of its deferred tax assets on the Company’s consolidated balance sheet with a corresponding non-cash charge to income tax expense in the consolidated statements of operations.
During the year ended September 30, 2015, the Company utilized $0 and $8,433 of federal and state net operating loss carryforwards, respectively generated during fiscal 2014. During the year ended September 30, 2015, the Company also utilized $4,481 and $2,214 of federal and state research and development tax credit and other credit carryforwards, respectively, generated during 2014.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years are still open under statute from 2013 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods. The Company has recently received notification of examination by the Internal Revenue Service for the year ending September 30, 2016. No adjustments have been proposed to date. The Company has not received notice of examination by any other jurisdictions for any other tax year open under statute.
Uncertain tax positions represent tax positions for which reserves have been established. The Company’s policy is to record interest and penalties related to uncertain tax positions as part of income tax expense. A reconciliation of the beginning and ending amount of uncertain tax positions is summarized as follows:
|
|
|
|
September 30, |
|
|||||
|
|
|
2017 |
|
|
2016 |
|
|||
|
|
|
|
(in thousands) |
|
|||||
|
Beginning Balance |
|
$ |
745 |
|
|
$ |
448 |
|
|
|
Additions based on tax positions for the current period |
|
|
134 |
|
|
|
294 |
|
|
|
Additions based on tax positions for prior periods |
|
|
355 |
|
|
|
16 |
|
|
|
Reductions for tax positions of prior periods |
|
|
(59 |
) |
|
|
(13 |
) |
|
|
Ending Balance |
|
$ |
1,175 |
|
|
$ |
745 |
|
|
The Company does not expect that its uncertain tax position will materially change within the next twelve months.