Income Taxes |
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| Income Taxes |
14. Income Tax
The following table presents the provision for income taxes and our effective tax rate for the three-month periods ended December 31, 2024 and 2023:
No income tax benefit was recognized for the three months ended December 31, 2024 because the Company is forecasting pre-tax income for the full year so the tax benefit is not expected to be realized during the current year in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 740, Income Taxes. Similarly, the Company did not recognize an income tax benefit for the three months ended December 31, 2023 as the Company was then forecasting pre-tax income for the full year.
The estimated annual effective tax rates for the fiscal years ending September 30, 2025 and ended September 30, 2024 are 22% and 2%, respectively. The estimated annual effective income tax rates are based upon the estimated income for the year, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies.
Under Internal Revenue Code 382, if a corporation undergoes a specified change in ownership, the corporation’s ability to use its pre-change net operating loss (“NOL”) carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Such limitation may result in the expiration of the NOL carryforwards generated before 2018 prior to their utilization. The Company has performed internal analysis and developed estimates of potential exposure to Section 382 limitations on usage of its NOL carryforwards and other tax attributes and believes that such limitations would not materially restrict its ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change taxable income. As of the filing date, the Company has engaged outside tax experts to perform a comprehensive section 382 study to supplement the Company’s internal analysis; however, the section 382 study has not been completed and thus the effects of any section 382 limitations on the utilization of NOLs and the valuation allowance that may be identified by the study cannot be determined as of the filing of this Form 10Q. The Company expects the 382 study and any effects on the valuation allowance to be completed by the time the Company files its Form 10-Q for the quarter ended March 31, 2025. |
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