Income taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income taxes | Income taxes The Company recorded an income tax benefit of $10.4 million and $1.9 million for the years ended September 30, 2022 and 2021, respectively. The Company recorded provisions for income taxes of $0.4 million for the year ended September 30, 2020. The domestic and foreign components of pre-tax loss for the years ended September 30, 2022, 2021, and 2020 are as follows:
The components of the provision for income taxes for the years ended September 30, 2022, 2021, and 2020 are as follows:
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended September 30, 2022, 2021, and 2020:
The significant components of the Company’s deferred tax assets and liabilities are as follows for the years ended September 30, 2022, and 2021:
Based on the available objective evidence, management believes it is more likely than not that the deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its deferred tax assets at September 30, 2022 and 2021. The valuation allowance was $240.7 million and $190.4 million as of September 30, 2022 and 2021, respectively. The change in the valuation allowance was mainly due to an increase in the net operating loss and research and development credits during the fiscal year 2022. The Company intends to continue maintaining a full valuation allowance on the Company’s deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the allowance. The release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. As of September 30, 2022, the Company had net operating loss carryforwards of approximately $777.2 million and $452.2 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The net operating losses will begin to expire in fiscal year 2024. The Company also had federal and state research and development credit carryforwards of approximately $29.9 million and $20.8 million, respectively, at September 30, 2022. The federal credits will expire starting in 2033 if not utilized. The California research and development credits have no expiration date. Utilization of the net operating losses and tax credits is subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations may result in the expiration of the net operating losses and tax credits before utilization. The provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, prescribe a comprehensive model for the recognition, measurement, and presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. The Company has identified uncertain tax positions related to federal and state research and development credits and foreign jurisdictions. The aggregate changes in the balance of gross unrecognized tax benefits are as follows:
The Company does not expect a material change in unrecognized tax benefits in the next twelve months. As of September 30, 2022 and 2021, approximately $0.1 million and $0.1 million of unrecognized tax benefit would, if recognized, impact the Company’s effective income tax rate, respectively. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company’s management determined that no accrual for interest and penalties was required as of September 30, 2022 and 2021. The Company’s files federal and state income tax returns with varying statutes of limitations. All tax years remain open to examination due to the carryover of net operating losses or tax credits. The Company currently has no federal or state tax examinations in progress. On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. In general, the provisions of the IRA will become effective beginning in 2023, with certain exceptions. The Company currently does not expect the IRA to have a material impact on its consolidated financial statements. Management will continue to evaluate the potential impact of the IRA on the Company's financial statements.
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