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Income Taxes | 12 Months Ended
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Sep. 30, 2015
Income Taxes |
Income Taxes | 17. Income Taxes Income before income taxes included (loss) income from domestic operations of $(214.6) million, $138.2 million and $111.8 million for fiscal years ended September 30, 2015, 2014 and 2013 and income from foreign operations of $63.1 million, $176.6 million and $224.0 million for fiscal years ended September 30, 2015, 2014 and 2013. Income tax (benefit) expense on continuing operations was comprised of:
|  | Fiscal Year Ended |
|  | September 30, 2015 |  | September 30, 2014 |  | September 30, 2013 |
|  | (in millions) |
Current: |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (67.1 | ) | $ | 5.3 |  | $ | 30.3 |
State |  |  | 2.6 |  |  | 3.3 |  |  | 9.9 |
Foreign |  |  | 37.2 |  |  | 46.3 |  |  | 59.7 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total current income tax (benefit) expense |  |  | (27.3 | ) |  | 54.9 |  |  | 99.9 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred: |  |  |  |  |  |  |  |  |  |
Federal |  |  | (44.2 | ) |  | 27.7 |  |  | 5.8 |
State |  |  | 1.2 |  |  | 5.6 |  |  | (10.6 | )
Foreign |  |  | (10.0 | ) |  | (6.2 | ) |  | (2.5 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total deferred income tax (benefit) expense |  |  | (53.0 | ) |  | 27.1 |  |  | (7.3 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total income tax (benefit) expense |  | $ | (80.3 | ) | $ | 82.0 |  | $ | 92.6 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The major elements contributing to the difference between the U.S. federal statutory rate of 35.0% and the effective tax rate are as follows:
|  | Fiscal Year Ended |
|  | September 30, 2015 |  | September 30, 2014 |  | September 30, 2013 |
|  | Amount |  | % |  | Amount |  | % |  | Amount |  | % |
|  | (in millions) |
Tax at federal statutory rate |  | $ | (53.0 | ) |  | 35.0 | % | $ | 110.2 |  |  | 35.0 | % | $ | 117.5 |  |  | 35.0 | %
State income tax, net of federal benefit |  |  | (2.3 | ) |  | 1.5 |  |  | 5.0 |  |  | 1.6 |  |  | 2.5 |  |  | 0.7 |
Exclusion of tax on non-controlling interests |  |  | (29.3 | ) |  | 19.3 |  |  | — |  |  | — |  |  | — |  |  | — |
Income tax credits and incentives |  |  | (21.1 | ) |  | 14.0 |  |  | (7.1 | ) |  | (2.2 | ) |  | (14.7 | ) |  | (4.3 | )
Foreign tax rate differential |  |  | (14.0 | ) |  | 9.3 |  |  | (22.5 | ) |  | (7.2 | ) |  | (9.9 | ) |  | (2.9 | )
Change in uncertain tax positions |  |  | 6.5 |  |  | (4.3 | ) |  | (4.5 | ) |  | (1.4 | ) |  | (7.3 | ) |  | (2.2 | )
Valuation allowance |  |  | 30.0 |  |  | (19.8 | ) |  | 6.3 |  |  | 2.0 |  |  | 1.6 |  |  | 0.5 |
Domestic production activities deduction |  |  | — |  |  | — |  |  | (11.7 | ) |  | (3.7 | ) |  | (2.6 | ) |  | (0.8 | )
Nondeductible transaction costs |  |  | 2.8 |  |  | (1.9 | ) |  | 2.8 |  |  | 0.9 |  |  | — |  |  | — |
Other items, net |  |  | 0.1 |  |  | (0.1 | ) |  | 3.5 |  |  | 1.1 |  |  | 5.5 |  |  | 1.6 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total income tax expense |  | $ | (80.3 | ) |  | 53.0 | % | $ | 82.0 |  |  | 26.1 | % | $ | 92.6 |  |  | 27.6 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
During the year ended September 30, 2015, the Company recognized a $19.4 million tax benefit related to U.S. tax incentives and credits that expired on December 31, 2014. During the year ended September 30, 2015, the Company also benefited from the application of IRC section 954(c)(6) dealing with the exception to current U.S. taxation of certain inter-company payments among controlled foreign corporations. Section 954(c)(6) expired on September 30, 2015 for the Company. Unless retroactively extended, the expiration of section 954(c)(6) and the other expired provisions could have a material impact on our consolidated results of operations in subsequent years. The deferred tax assets (liabilities) are as follows:
|  | Fiscal Year Ended |
|  | September 30, 2015 |  | September 30, 2014 |
|  | (in millions) |
Deferred tax assets: |  |  |  |  |  |  |
Compensation and benefit accruals not currently deductible |  | $ | 166.7 |  | $ | 65.5 |
Net operating loss carry forwards |  |  | 195.9 |  |  | 69.3 |
Self insurance reserves |  |  | 46.8 |  |  | 48.8 |
Research and Experimentation and other tax credits |  |  | 43.0 |  |  | 34.2 |
Pension liability |  |  | 165.6 |  |  | 59.4 |
Accrued liabilities |  |  | 267.3 |  |  | 63.7 |
Other |  |  | 11.4 |  |  | 26.2 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total deferred tax assets |  |  | 896.7 |  |  | 367.1 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities: |  |  |  |  |  |  |
Unearned revenue |  |  | (101.9 | ) |  | (122.9 | )
Depreciation and amortization |  |  | (76.5 | ) |  | (59.2 | )
Acquired intangible assets |  |  | (219.2 | ) |  | (14.8 | )
Investment in subsidiaries |  |  | (239.2 | ) |  | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total deferred tax liabilities |  |  | (636.8 | ) |  | (196.9 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Valuation allowance |  |  | (239.4 | ) |  | (27.1 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net deferred tax assets |  | $ | 20.5 |  | $ | 143.1 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
As of September 30, 2015, the Company has available unused state net operating loss (NOL) carry forwards of $526.0 million and foreign NOL carry forwards of $828.7 million which expire at various dates. In addition, as of September 30, 2015, the Company has unused federal and state research and development credits of $22.4 million and California Enterprise Zone Tax Credits of $6.8 million. As of September 30, 2015 and 2014, gross deferred tax assets were $896.7 million and $367.1 million, respectively. The Company has recorded a valuation allowance of approximately $239.4 million and $27.1 million at September 30, 2015 and 2014, respectively, related to state and foreign net operating loss carry forwards and credits. The Company has performed an assessment of positive and negative evidence, including the nature, frequency, and severity of cumulative financial reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant carry forward periods, taxable income in carry-back years if carry-back is permitted under tax law, and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire. Although realization is not assured, based on the Company's assessment, the Company has concluded that it is more likely than not that the remaining gross deferred tax asset (exclusive of deferred tax liabilities) of $657.3 million will be realized and, as such, no additional valuation allowance has been provided. The increase in the valuation allowance of $212 million is primarily attributable to the acquisition of URS of $182 million which were recorded in business combination, and certain current year foreign losses which were allocated to income from continuing operations. As of September 30, 2015 and 2014, the Company has remaining tax-deductible goodwill of $261.2 million and $251.6 million, respectively, resulting from acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 15 years. Generally, the Company does not provide for U.S. taxes or foreign withholding taxes on undistributed earnings from non-U.S. subsidiaries because such earnings are able to and intended to be reinvested indefinitely. The undistributed earnings are approximately $1,341.2 million. If undistributed pre-tax earnings were distributed, foreign tax credits could become available under current law to partially or fully reduce the resulting U.S. income tax liability. If such earnings were repatriated, additional tax expense may result, although the calculation of such additional taxes is not practicable. The Company recorded a deferred tax liability in the amount of $88.2 million relating to certain foreign subsidiaries for which the undistributed earnings are not intended to be reinvested indefinitely as part of the liabilities assumed in connection with the acquisition of URS on October 17, 2014. The Company also recorded a deferred tax liability of $145.6 million in business combination for a stock basis adjustment that was inherited in the URS acquisition. As of September 30, 2015 and 2014, the Company had a liability for unrecognized tax benefits, including potential interest and penalties, net of related tax benefit, totaling $107.6 million and $52.6 million, respectively. The gross unrecognized tax benefits as of September 30, 2015 and 2014 were $95.2 million and $47.5 million, respectively, excluding interest, penalties, and related tax benefit. Of the $95.2 million, approximately $77.0 million would be included in the effective tax rate if recognized in the fiscal year ended September 30, 2015. The adoption of ASC 805, "Accounting for Business Combinations," at the beginning of the fiscal year ended September 30, 2010 changed the treatment of the reversal of unrecognized tax benefits related to acquired companies which prior to adoption of ASC 805 would have impacted goodwill, but after the adoption of ASC 805, results in the recognition of income tax benefit. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
|  | Fiscal Year Ended |
|  | September 30, 2015 |  | September 30, 2014 |
|  | (in millions) |
Balance at the beginning of the year |  | $ | 47.5 |  | $ | 53.7 |
Gross increase due to acquisitions |  |  | 49.4 |  |  | — |
Gross increase in prior years' tax positions |  |  | 6.4 |  |  | 3.3 |
Gross decrease in prior years' tax positions |  |  | (0.2 | ) |  | (7.6 | )
Decrease due to settlement with tax authorities |  |  | (2.0 | ) |  | (2.0 | )
Gross increase in current period's tax positions |  |  | 6.0 |  |  | 2.2 |
Decrease due to lapse of statute of limitations |  |  | (4.6 | ) |  | (2.1 | )
Gross change due to foreign exchange fluctuations |  |  | (7.3 | ) |  | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance at the end of the year |  | $ | 95.2 |  | $ | 47.5 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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The Company classifies interest and penalties related to uncertain tax positions within the income tax expense line in the accompanying consolidated statements of operations. At September 30, 2015, the accrued interest and penalties, including balances acquired in the URS acquisition, were $13.9 million and $3.5 million, respectively, excluding any related income tax benefits. As of September 30, 2014, the accrued interest and penalties were $6.2 million and $2.9 million, respectively, excluding any related income tax benefits. The Company files income tax returns in numerous tax jurisdictions, including the U.S., and numerous U.S. states and non-U.S. jurisdictions around the world. The statute of limitations varies by jurisdiction in which the Company operates. Because of the number of jurisdictions in which the Company files tax returns, in any given year the statute of limitations in certain jurisdictions may expire without examination within the 12-month period from the balance sheet date. The Company is currently under examination by the U.S. Internal Revenue Service for the fiscal years ended September 30, 2010 and September 30, 2011. With a few exceptions, the Company is no longer subject to U.S. state or non-U.S. income tax examinations by tax on authorities for years before fiscal year 2010. The Company anticipates that some of the audits may be concluded in the foreseeable future, including in fiscal year ending September 30, 2016. Based on the status of these audits, it is reasonably possible that the conclusion of the audits may result in a reduction of unrecognized tax benefits. It is not possible to estimate the impact of any change at this time. In July 2013, the FASB issued ASU No. 2013-11, "Income Taxes (Topic 740) Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." This topic provides guidance on whether an unrecognized tax benefit should be presented as a reduction to a deferred tax asset or as a separate liability. This update was effective for annual and interim periods beginning after December 15, 2013, and we adopted this ASU on October 1, 2014. The adoption of this update resulted in a decrease to the September 30, 2015 deferred tax asset balance of $34.8 million.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 + Details
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