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Income Taxes | 12 Months Ended
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Sep. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7 — Income Taxes Income before income taxes comprises the following:
| 2019 |  | 2018 |  | 2017
Domestic | $ | 329.4 |  |  | $ | 576.0 |  |  | $ | 527.3 |
Foreign | 71.1 |  |  | 278.5 |  |  | 174.1 |
Total income before income taxes | $ | 400.5 |  |  | $ | 854.5 |  |  | $ | 701.4 |
The provisions for income taxes consist of the following:
| 2019 |  | 2018 |  | 2017
Current expense (benefit): |  |  |  |  |
Federal | $ | 51.7 |  |  | $ | (2.7 | ) |  | $ | (2.7 | )
State | 14.0 |  |  | 26.0 |  |  | 14.0 |
Foreign | 69.6 |  |  | 77.6 |  |  | 56.2 |
Total current expense | 135.3 |  |  | 100.9 |  |  | 67.5 |
Deferred expense (benefit): |  |  |  |  |
Federal | 2.9 |  |  | (77.1 | ) |  | 125.8 |
State | 3.5 |  |  | 6.7 |  |  | 16.4 |
Foreign | (48.8 | ) |  | 1.9 |  |  | (31.8 | )
Investment tax credit amortization | (0.3 | ) |  | (0.3 | ) |  | (0.3 | )
Total deferred expense | (42.7 | ) |  | (68.8 | ) |  | 110.1 |
Total income tax expense | $ | 92.6 |  |  | $ | 32.1 |  |  | $ | 177.6 |
Federal income taxes for Fiscal 2019, Fiscal 2018 and Fiscal 2017 are net of foreign tax credits of $9.8, $13.0 and $40.9, respectively. A reconciliation from the U.S. federal statutory tax rate to our effective tax rate is as follows:
| 2019 |  | 2018 |  | 2017
U.S. federal statutory tax rate | 21.0 | % |  | 24.5 | % |  | 35.0 | %
Difference in tax rate due to: |  |  |  |  |
Effect of tax rate changes - TJCA | 0.2 |  |  | (20.9 | ) |  | — |
Effect of tax rate changes - International | (0.5 | ) |  | (2.1 | ) |  | (4.1 | )
Noncontrolling interests not subject to tax | (2.7 | ) |  | (3.0 | ) |  | (4.3 | )
State income taxes, net of federal benefit | 3.6 |  |  | 2.9 |  |  | 2.9 |
Valuation allowance adjustments | — |  |  | 1.1 |  |  | (1.1 | )
Effects of foreign operations | 1.8 |  |  | 3.1 |  |  | (1.1 | )
Excess tax benefits on share-based payments | (1.0 | ) |  | (1.1 | ) |  | (1.3 | )
Other, net | 0.7 |  |  | (0.7 | ) |  | (0.7 | )
Effective tax rate | 23.1 | % |  | 3.8 | % |  | 25.3 | %
On December 22, 2017, the TCJA was enacted into law. Among the significant changes resulting from the law, the TCJA reduced the U.S. federal income tax rate from 35% to 21%, effective January 1, 2018, created a territorial tax system with a one-time mandatory “toll tax” on previously un-repatriated foreign earnings, and allowed for immediate capital expensing of certain qualified property. It also applied restrictions on the deductibility of interest expense, eliminated bonus depreciation for regulated utilities and certain FERC-regulated property beginning in Fiscal 2019 and applied a broader application of compensation limitations. As a result of the TCJA, we reduced our net deferred income tax liabilities in Fiscal 2018 by $384.4 due to the remeasuring of our existing federal deferred income tax assets and liabilities as of the date of the enactment of the TCJA on December 22, 2017. Because most of the reduction to UGI Utilities’ net deferred income taxes related to regulated utility plant assets, most of UGI Utilities’ reduction in deferred income taxes was not recognized immediately in income tax expense. In accordance with GAAP as determined by ASC 740, we are required to record the effects of tax law changes in the period enacted. Our results for Fiscal 2018 contained provisional estimates of the impact of the TCJA. These amounts were considered provisional because they used estimates for which tax returns had not yet been filed and because estimated amounts could have been impacted by future regulatory and accounting guidance if and when issued. We adjusted provisional amounts as further information became available and as we refined our calculations. As permitted by SEC Staff Bulletin No. 118, these adjustments occurred during the reasonable “measurement period” defined as twelve months from the date of enactment. During Fiscal 2019, adjustments to provisional amounts recorded in prior periods were not material. In Fiscal 2018, we were subject to a blended federal tax rate of 24.5% because our fiscal year contained the effective date of the rate change from 35% to 21%. The effects of the tax law changes on Fiscal 2018 results (excluding the remeasurement impact described above) decreased income tax by $52.1. In order for UGI Utilities’ regulated utility plant assets to continue to be eligible for accelerated tax depreciation, current law requires that excess deferred federal income taxes resulting from the remeasurement of deferred taxes on regulated utility plant be amortized no more rapidly than over the remaining lives of the assets that gave rise to the excess deferred income taxes. As a result of the TCJA, for Fiscal 2018, UGI Utilities initially recorded a net regulatory liability of $205.6 associated with excess deferred federal income taxes related to its regulated utility plant assets. This regulatory liability was increased, and a federal deferred income tax asset was recorded, in the amount of $83.6 to reflect the tax benefit generated by the amortization of the excess deferred federal income taxes. This regulatory liability is being amortized to income tax expense over the remaining lives of the assets that gave rise to the excess deferred income taxes. For further information on this regulatory liability, see Note 9. As further described in Note 9, on May 17, 2018, the PAPUC issued a Temporary Rates Order for all PAPUC-regulated utilities with regard to federal tax reform. Among other things, the Temporary Rates Order required Pennsylvania utilities to establish a regulatory liability for tax benefits that accrued during the period January 1, 2018 through June 30, 2018, resulting from the change in the federal income tax rate from 35% to 21%. In accordance with the Temporary Rates Order, during Fiscal 2018, UGI Utilities reduced its revenues by $24.1 and recorded a regulatory liability in an equal amount. The total reduction of $24.1 primarily reflects (1) $17.1 of tax benefits accrued during the period January 1, 2018 to June 30, 2018, and (2) $7.0 to reflect tax benefits expected to be generated by the future amortization of the regulatory liability and accrued interest. In Fiscal 2018 and Fiscal 2017, earnings of the Company’s foreign subsidiaries were generally subject to U.S. taxation upon repatriation to the U.S. and the Company’s tax provisions reflected the related incremental U.S. tax except for certain foreign subsidiaries whose unremitted earnings were considered to be indefinitely reinvested. No deferred tax liability had been recognized with regard to remittance of those earnings because of the availability of U.S. foreign tax credits made it likely that no U.S. tax would be due if such earnings were repatriated. Upon enactment of the TCJA, substantially all prior unrepatriated earnings were subjected to U.S. tax under the transition tax rules. The transition tax was immaterial to the Company and we generally expect to have the ability to repatriate prior unrepatriated earnings without material U.S. federal tax cost. Our Fiscal 2019 effective tax rate was subject to the impact of changes to the taxation of foreign source income made by the TCJA. Fiscal 2019 tax expense includes $3.8 of GILTI and Branch taxes that are treated as current period costs and carry no related deferred taxes. Pennsylvania utility ratemaking practice permits the flow through to ratepayers of state tax benefits resulting from accelerated tax depreciation. For Fiscal 2019, Fiscal 2018 and Fiscal 2017, the beneficial effects of state tax flow through of accelerated depreciation reduced income tax expense by $7.4, $4.2 and $2.5, respectively. Deferred tax liabilities (assets) comprise the following at September 30:
| 2019 |  | 2018
Excess book basis over tax basis of property, plant and equipment | $ | 804.5 |  |  | $ | 807.8 |
Investment in AmeriGas Partners | — |  |  | 219.2 |
Utility regulatory assets | 107.6 |  |  | 86.7 |
Intangible assets and goodwill | 70.5 |  |  | 67.6 |
Derivative instruments | — |  |  | 30.4 |
Other | 8.3 |  |  | 10.6 |
Gross deferred tax liabilities | 990.9 |  |  | 1,222.3 |
Investment in AmeriGas Partners | (303.5 | ) |  | — |
Pension plan liabilities | (49.9 | ) |  | (20.0 | )
Employee-related benefits | (43.8 | ) |  | (43.6 | )
Operating loss carryforwards | (21.2 | ) |  | (26.2 | )
Foreign tax credit carryforwards | (81.4 | ) |  | (106.1 | )
Utility regulatory liabilities | (94.3 | ) |  | (118.6 | )
Derivative instruments | (15.3 | ) |  | — |
Utility environmental liabilities | (15.3 | ) |  | (14.7 | )
Other | (33.4 | ) |  | (29.0 | )
Gross deferred tax assets | (658.1 | ) |  | (358.2 | )
Deferred tax assets valuation allowance | 90.7 |  |  | 116.8 |
Net deferred tax liabilities | $ | 423.5 |  |  | $ | 980.9 |
As a result of the AmeriGas Merger, we acquired all of the equity interests of AmeriGas Partners. In exchange for the interest acquired from the public, we issued stock and paid cash having a total implied fair value of $2,227.7. The transaction represents a taxable exchange for which we received a step-up in the tax basis in the underlying assets acquired. A gross deferred tax asset of $2,030.3 related to the book tax basis difference in this investment has been recorded through equity in accordance with ASC 810. We evaluated the realizability of the resulting net deferred tax asset position of $512.3 assessing the available positive and negative evidence. As the taxable temporary differences of the Partnership’s tax depreciation in excess of book depreciation reverses, the associated deferred taxes are expected to be fully realized. In July 2019, the French Parliament enacted legislation retroactively increasing the corporate income tax rate for tax years beginning in 2019. As a result, the Fiscal 2020 tax rate remains at 34.43%. The impact on deferred income tax liabilities increased income tax expense by $2.4. In December 2017, the French Parliament approved the December 2017 French Finance Bills. One impact of the December 2017 French Finance Bills was an increase in the Fiscal 2018 corporate income tax rate in France from 34.4% to 39.4%. The December 2017 French Finance Bills also include measures to reduce the corporate income tax rate to 25.8%, effective for fiscal years starting after January 1, 2022 (Fiscal 2023). As a result of the December 2017 French Finance Bills, the Company reduced its net French deferred income tax liabilities and recognized an estimated deferred tax benefit of $12.1 to reflect the estimated impact of the corporate income tax rate reductions that will be implemented through Fiscal 2023. The Company’s Fiscal 2018 effective income tax rate reflects the impact of the higher Fiscal 2018 income tax rate in France as a result of the December 2017 French Finance Bills, which increased income tax expense for the year by approximately $0.6. At September 30, 2019, foreign net operating loss carryforwards principally relating to Flaga and certain subsidiaries of UGI France totaled $10.0 and $22.0, respectively, with no expiration dates. We have state net operating loss carryforwards primarily relating to certain subsidiaries that approximate $147.9 and expire through 2039. We also have federal operating loss carryforwards of $14.3 for certain operations of AmeriGas Propane that expire through 2036. At September 30, 2019, deferred tax assets relating to operating loss carryforwards include $2.0 for Flaga, $6.8 for certain subsidiaries of UGI France, $3.0 for AmeriGas Propane and $9.4 for certain other subsidiaries. Valuation allowances against deferred tax assets exist for foreign tax credit carryforwards and net operating loss carryforwards of foreign subsidiaries. The valuation allowance for all deferred tax assets decreased by $26.1 in Fiscal 2019. The decrease consisted of the release of $24.8 of valuation allowances on foreign tax credits that expired in Fiscal 2019 and a decrease in foreign operating loss carryforwards of $1.3. The valuation allowance for all deferred tax assets increased by $9.7 in Fiscal 2018 due to an increase of $7.6 to re-establish a full valuation allowance associated with future utilization of foreign tax credits, primarily due to impacts of the TCJA and an increase in foreign operating loss carryforwards of $2.1. We conduct business and file tax returns in the U.S., numerous states, local jurisdictions and in France and certain other European countries. Our U.S. federal income tax returns are settled through the 2015 tax year, our French tax returns are settled through the 2017 tax year, our Austrian tax returns are settled through 2016 and our other European tax returns are effectively settled for various years from 2010 to 2017. State and other income tax returns in the U.S. are generally subject to examination for a period of three to five years after the filing of the respective returns. UGI Corporation and subsidiaries’ 2017 and 2016 consolidated U.S. federal tax returns are currently under examination by the Internal Revenue Service. As of September 30, 2019, we have unrecognized income tax benefits totaling $10.9 including related accrued interest of $1.0. If these unrecognized tax benefits were subsequently recognized, $10.9 would be recorded as a benefit to income taxes on the Consolidated Statement of Income and, therefore, would impact the reported effective tax rate. Generally, a net reduction in unrecognized tax benefits could occur because of the expiration of the statute of limitations in certain jurisdictions or as a result of settlements with tax authorities. The expected change in unrecognized tax benefits and related interest in the next twelve months is $2.8 as the result of the expiration of certain statutes of limitation. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| 2019 |  | 2018 |  | 2017
Unrecognized tax benefits — beginning of year | $ | 11.5 |  |  | $ | 12.2 |  |  | $ | 7.2 |
Additions for tax positions of the current year | 0.9 |  |  | 1.5 |  |  | 1.9 |
Additions for tax positions taken in prior years | 0.4 |  |  | 0.6 |  |  | 4.6 |
Settlements with tax authorities/statute lapses | (1.9 | ) |  | (2.8 | ) |  | (1.5 | )
Unrecognized tax benefits — end of year | $ | 10.9 |  |  | $ | 11.5 |  |  | $ | 12.2 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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