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Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income Tax Expense The components of the Company’s income tax expense are as follows:
| Year Ended September 30,
| 2017 |  | 2016 |  | 2015
| (In millions)
Current tax expense: |  |  |  |  |  |  |  |
Federal | $ | 425.6 |  |  | $ | 376.0 |  |  | $ | 356.4 |
State | 27.3 |  |  | 15.9 |  |  | 13.2 |
| 452.9 |  |  | 391.9 |  |  | 369.6 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |
Federal | 87.9 |  |  | 47.6 |  |  | (3.1 | )
State | 22.9 |  |  | 27.7 |  |  | 6.2 |
| 110.8 |  |  | 75.3 |  |  | 3.1 |
Total income tax expense | $ | 563.7 |  |  | $ | 467.2 |  |  | $ | 372.7 |
The Company’s effective tax rate was 35.2%, 34.5% and 33.2% in fiscal 2017, 2016 and 2015, respectively. The effective tax rate for all years includes an expense for state income taxes, reduced by tax benefits for the domestic production activities deduction and federal energy tax credits. The effective tax rate for fiscal 2015 also includes a tax benefit for a reduction in the valuation allowance on deferred tax assets. The Company previously filed three requests for advance consent for a change in tax accounting method with the Internal Revenue Service (IRS) relating to changes in the timing of income and expense recognition for tax purposes. The Company agreed to and signed consent agreements for two of the three requests during the quarter ended June 30, 2017. The impact of the approved tax accounting method changes was reflected in the consolidated financial statements as of June 30, 2017 as a reduction in income taxes payable of $58.2 million, a reduction in the deferred tax asset related to inventory costs of $50.1 million, an increase in the deferred tax liability related to the deferral of profit on home sales of $13.4 million and income tax expense of $5.3 million. The third request for advance consent for a change in tax accounting method will be recognized in the period in which a consent agreement is issued by the IRS and agreed to and signed by the Company. Reconciliation of Expected Income Tax Expense Differences between income tax expense and tax computed by applying the federal statutory rate of 35% to income before income taxes during each year is due to the following:
| Year Ended September 30,
| 2017 |  | 2016 |  | 2015
| (In millions)
Income taxes at federal statutory rate | $ | 560.7 |  |  | $ | 473.7 |  |  | $ | 393.2 |
Increase (decrease) in tax resulting from: |  |  |  |  |
State income taxes, net of federal benefit | 42.3 |  |  | 38.6 |  |  | 37.0 |
Domestic production activities deduction | (39.8 | ) |  | (36.3 | ) |  | (35.7 | )
Valuation allowance | 0.8 |  |  | 0.2 |  |  | (21.0 | )
Tax credits | (3.5 | ) |  | (15.9 | ) |  | (2.2 | )
Other | 3.2 |  |  | 6.9 |  |  | 1.4 |
Total income tax expense | $ | 563.7 |  |  | $ | 467.2 |  |  | $ | 372.7 |
Deferred Income Taxes Deferred tax assets and liabilities reflect the tax consequences of temporary differences between the financial statement amounts of assets and liabilities and their tax bases and of tax loss and credit carryforwards. Components of deferred income taxes are summarized as follows:
| September 30,
| 2017 |  | 2016
| (In millions)
Deferred tax assets: |  |  |  |  |
Inventory costs | $ | 42.6 |  |  | $ | 87.6 |
Inventory impairments | 83.9 |  |  | 128.3 |
Warranty and construction defect costs | 163.7 |  |  | 138.8 |
Net operating loss carryforwards | 26.2 |  |  | 40.1 |
Tax credit carryforwards | 2.5 |  |  | 2.9 |
Incentive compensation plans | 92.6 |  |  | 82.2 |
Deferred income | 1.7 |  |  | 2.2 |
Other | 13.9 |  |  | 11.1 |
Total deferred tax assets | 427.1 |  |  | 493.2 |
Valuation allowance | (11.2 | ) |  | (10.3 | )
Total deferred tax assets, net of valuation allowance | 415.9 |  |  | 482.9 |
Deferred tax liabilities: |  |  |
Deferral of profit on home sales | 41.6 |  |  | — |
Other | 9.3 |  |  | 6.6 |
Total deferred tax liabilities | $ | 50.9 |  |  | $ | 6.6 |
Deferred income taxes, net | $ | 365.0 |  |  | $ | 476.3 |
Tax benefits of $26.2 million exist for state net operating loss (NOL) carryforwards that will expire at various times depending on the tax jurisdiction. Of the total amount, $3.8 million of the tax benefits will expire from fiscal years 2018 to 2022, $2.7 million will expire from fiscal years 2023 to 2027 and $19.7 million will expire from fiscal years 2028 to 2037. Tax benefits for state tax credit carryforwards of $1.4 million will expire from fiscal years 2018 to 2019 and $1.1 million of tax benefits for state tax credit carryforwards have no expiration date. The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets. Valuation Allowance When assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of sufficient taxable income in future periods. The Company records a valuation allowance when it determines it is more likely than not that a portion of the deferred tax assets will not be realized. The valuation allowance for both years relates to the Company’s state deferred tax assets for NOL carryforwards. As of September 30, 2017, the Company believes it is more likely than not that a portion of its state NOL carryforwards will not be realized because some state NOL carryforward periods are too brief to realize the related deferred tax assets. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to its remaining state NOL carryforwards. Unrecognized Tax Benefits Unrecognized tax benefits are the differences between tax positions taken or expected to be taken in a tax return and the benefits recognized for accounting purposes. The Company had no unrecognized tax benefits and no accrued interest or penalties related to unrecognized tax benefits at September 30, 2017, 2016 and 2015. The Company classifies interest expense and penalties on income taxes as income tax expense. Regulations and Legislation The Company is subject to federal income tax and to income tax in multiple states. The statute of limitations for the Company’s major tax jurisdictions remains open for examination for fiscal years 2014 through 2017. The Company is currently being audited by various states; however, to date, management is not aware of any significant findings identified by the taxing authorities.

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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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