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Income Taxes | 3 Months Ended
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Dec. 31, 2017
Income Taxes |
INCOME TAXES | 10. Income Taxes On December 22, 2017 the United States enacted the Tax Cuts and Jobs Act (the “Act”) which made significant changes to the U.S. federal income tax law. The Act is a comprehensive bill containing several provisions which the Company has been and is still analyzing. The Act includes a reduction to the federal statutory corporate income tax rate. Since the Company has a September 30 fiscal year end, the rate reduction will be phased in over two fiscal years. As such, IRC Section 15 provides the Company will be taxed at a blended 24.5 percent federal statutory income tax rate in fiscal 2018 and then the enacted 21 percent federal income tax rate in subsequent fiscal years. The Company recorded tax benefits of $500.6 million and $18.3 million for the first three months of fiscal 2018 and 2017, respectively. The amounts represent effective tax rates of 50,064,100.0 percent and 34.6 percent respectively. The unusual effective tax rate calculated for the first three months of fiscal 2018 is due to the recording of discrete tax benefits of $500.6 million (of which $500.4 million relates to an estimate of the re-measurement of the Company’s net deferred tax liability as a result of the new corporate income tax rate from the Act). Other effective tax rate differences from the U.S. federal statutory rate are due to incremental state and foreign income taxes and non-deductible permanent items. The staff of the U.S. Securities and Exchange Commission (“SEC”) has recognized the complexity of reflecting the impacts of the Act, and on December 22, 2017 issued guidance in Staff Accounting Bulletin 118 (“SAB 118”) which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or “buckets”) associated with a company’s status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. At December 31, 2017 we have not completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we have made reasonable estimates of the effects on our existing deferred tax balances. In other cases, we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under ASC 740. These items, some of which do not apply until fiscal 2019, include the impact on the deferred taxes of the Company’s foreign operations, the deductibility of certain executive compensation and the related impact to deferred taxes, deductibility of certain employee fringe benefits, and related state income tax adjustments. Provisional amounts Deferred tax assets and liabilities: We re-measured certain deferred tax assets and liabilities based upon the rates at which they are expected to reverse in the future, which is generally 21 percent. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. Included within our net deferred tax liability are deferred state income tax balances, which are recorded net of federal tax expense. While many states have not publicly commented on the changes in the Act, we have estimated the value of our state deferred tax balances based upon existing law and related guidance. The provisional benefit recorded to the re-measurement of our net deferred tax liability was $500.4 million. Foreign tax effects: The Act provides for a one-time transition tax based on total post-1986 earnings and profits (“E&P”) that were previously deferred from US income taxes. We have estimated no transition tax liability as a result of the Act. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from US federal taxation and finalize the amounts held in cash or other specified assets. At its January 10, 2018 board meeting, the FASB discussed several topics related to income tax accounting for tax reform. One topic was the reclassification of certain tax effects stranded in accumulated other comprehensive income (“AOCI”). According to FASB guidance, the tax effect of certain temporary differences are required to be reported within AOCI, which we have historically followed. As a result of the Act and the requirement to re-measure deferred tax assets/liabilities, we recorded approximately $0.3 million of tax benefit from continuing operations for the items which are normally reported as a component of AOCI. As of the date of this report, the FASB has not issued definitive guidance on whether this treatment should change, or which of the alternative proposed methodologies will ultimately be available. For this reason, we continue to follow official guidance, and will report any potential change in a subsequent reporting period. For the next 12 months, we cannot predict with certainty whether we will achieve ultimate resolution of any uncertain tax positions associated with our U.S. and international operations that could result in increases or decreases of our unrecognized tax benefits. However, we do not expect the increases or decreases to have a material effect on our results of operations or financial position.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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