Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Income Taxes

v3.8.0.1
Note 9 - Income Taxes
6 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
Note
9.
Income Taxes
 
For the
three
and
six
months ended
March 31, 2018,
the Company recorded a benefit for income taxes of
$101,000
and
$304,000,
respectively, reflecting an effective tax rate of
24.9%
and negative
91.1%,
respectively.
The Tax Cut and Jobs Act of
2017
(the “Tax Reform Act”) was enacted on
December 
22,
2017.
The Tax Reform Act reduced certain federal corporate income tax rates effective
January 1, 2018
and changed certain other provisions. The effective tax rate for the
six
months ended
March 31, 2018
is a blended rate reflecting the anticipated benefit of
three
quarters of federal tax rate reductions for fiscal
2018.
Our
six
months tax benefit reflects a lower tax rate and a
one
-time benefit of
$384,000
related to the favorable impact of a revaluation of our net deferred tax liability that decreased the income tax provision for the
six
months ended
March 31, 2018
and reduced long-term deferred tax liabilities during the
six
months ended
March 31, 2018.
The final impact of the Tax Reform Act
may
differ due to and among other things, changes in interpretations, assumptions made by the Company, the issuance of additional guidance, and actions the Company
may
take as a result of the Tax Reform Act. Additionally, differences between the effective tax rate and the statutory tax rate are related to nondeductible meals and entertainment,
expenses related to equity award compensation,
favorable domestic manufacturing deduction and research and development credits.
 
For the
three
and
six
months ended
March 31, 2017,
the Company recorded a provision for income taxes of
$433,000
and
$800,000,
respectively, reflecting an effective tax rate of
32.3%
and
31.0%,
respectively. The primary difference between the effective tax rate and the statutory tax rate is related to nondeductible meals and entertainment, favorable domestic manufacturing deduction and research and development credits, expenses related to equity award compensation and favorable discrete items for the
three
and
six
months ended
March 31, 2017
from tax benefits related to stock-based compensation awards.
 
As of
March 31, 2018
and
September 30, 2017,
the Company had a remaining valuation allowance of approximately
$191,000
and
$159,000,
respectively, related to state net operating loss carry forwards the Company does
not
expect to utilize. As a result of recording the impact of the Tax Reform Act on its deferred assets and liabilities, the Company recorded an increase in its valuation allowance against state net operating losses carried forward of approximately
$32,000
in the
six
months ended
March 31, 2018.
Based on the Company’s analysis and review of long-term forecasts and all available evidence, the Company determined that there should be
no
further change in the valuation allowance for the quarter ended
March 31, 2018.
 
Deferred taxes recognize the impact of temporary differences between the amounts of the assets and liabilities recorded for financial statement purposes and these amounts measured in accordance with tax laws. The Company’s realization of deferred tax temporary differences is contingent upon future taxable earnings. The Company reviewed its deferred tax assets for expected utilization using a “more likely than
not”
criteria by assessing the available positive and negative factors surrounding its recoverability.
 
As of
March 31, 2018,
we do
not
have any unrecognized tax benefits. It is the Company’s practice to recognize interest and penalties accrued on any unrecognize
d tax benefits as a component of income tax expense. The Company does
not
expect any material changes in its unrecognized tax positions over the next
12
months.
 
We are currently under examination by the U.S. Internal Revenue Service for fiscal year
2016.
We are
not
under examination by any other taxing jurisdiction. In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our Statements of Operations.