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INCOME TAXES | 12 Months Ended
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Sep. 30, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES A reconciliation of the U.S. federal statutory rate of 35 percent to the effective rate from operations for the fiscal years ended September 30, 2016, 2015 and 2014 is as follows:
(Thousands) | 2016 | 2015 | 2014
Statutory income tax expense | $ | 54,321 |  | $ | 84,239 |  | $ | 67,834 |
Change resulting from: |  |  |
State income taxes | 6,044 |  | 8,233 |  | 7,785 |
Cost of removal of assets placed in service prior to1981 | (5,738 | ) | (5,149 | ) | (4,437 | )
Investment/production tax credits | (32,491 | ) | (30,096 | ) | (23,083 | )
Basis adjustment of solar assets due to ITC | 4,453 |  | 4,861 |  | 3,959 |
Other | (3,059 | ) | (2,364 | ) | (218 | )
Income tax provision | $ | 23,530 |  | $ | 59,724 |  | $ | 51,840 |
Effective income tax rate | 15.2 | % | 24.8 | % | 26.8 | %
The income tax provision (benefit) from operations consists of the following:
(Thousands) | 2016 | 2015 | 2014
Current: |  |  |
Federal | $ | (23,597 | ) | $ | 20,492 |  | $ | 37,904 |
State | (2,209 | ) | 5,473 |  | 11,096 |
Deferred: |  |  |
Federal | 70,386 |  | 56,480 |  | 24,963 |
State | 11,441 |  | 7,375 |  | 960 |
Investment/production tax credits | (32,491 | ) | (30,096 | ) | (23,083 | )
Income tax provision | $ | 23,530 |  | $ | 59,724 |  | $ | 51,840 |
The temporary differences, which give rise to deferred tax assets and (liabilities), consist of the following:
(Thousands) | 2016 |  | 2015
Deferred tax assets |  |  |
Investment tax credits (1) | $ | 76,517 |  |  | $ | 24,770 |
Deferred service contract revenue | 3,601 |  |  | 3,440 |
Incentive compensation | 8,128 |  |  | 10,369 |
Fair value of derivatives | 1,179 |  |  | — |
Federal net operating losses | 27,541 |  |  | — |
State net operating losses | 18,113 |  |  | 12,757 |
Conservation incentive plan | — |  |  | 2,091 |
Underrecovered gas costs | 3,831 |  |  | 2,827 |
Other | 11,668 |  |  | 12,762 |
Total deferred tax assets | $ | 150,578 |  |  | $ | 69,016 |
Deferred tax liabilities |  |  |
Property related items | $ | (532,027 | ) |  | $ | (440,420 | )
Remediation costs | (7,928 | ) |  | (7,641 | )
Equity investments | (37,740 | ) |  | (37,930 | )
Postemployment benefits | (7,902 | ) |  | (2,976 | )
Fair value of derivatives | — |  |  | (3,180 | )
Conservation incentive plan | (14,953 | ) |  | — |
Other | (14,610 | ) |  | (13,409 | )
Total deferred tax liabilities | $ | (615,160 | ) |  | $ | (505,556 | )
Total net deferred tax liabilities | $ | (464,582 | ) |  | $ | (436,540 | )
(1) | Includes $2.5 million and $2.7 million for NJNG for fiscal 2016 and fiscal 2015, respectively, which is being amortized over the life of the related assets, and $74 million and $22.1 million for NJRCEV for fiscal 2016 and fiscal 2015, respectively, which is ITC carryforward.
The Company and one or more of its subsidiaries files or expects to file income and/or franchise tax returns in the U.S. Federal jurisdiction and in the states of New Jersey, New York, Connecticut, Texas, Delaware, Pennsylvania, North Carolina, Louisiana, Montana, Kansas, Iowa and the City of New York. The Company neither files in, nor believes it has a filing requirement in, any foreign jurisdictions, except Canada, which has no tax impact. The Company’s federal income tax returns through fiscal 2013 have either been reviewed by the IRS, or the related statute of limitations has expired and all matters have been settled. Federal income tax returns for periods subsequent to fiscal 2013 are not currently under examination by the IRS. The State of New Jersey is currently conducting a sales and use tax examination for the period from July 1, 2011 through June 30, 2015. All periods subsequent to those ended September 30, 2012, are statutorily open to examination in all applicable states with the exception of New York. In New York, all periods subsequent to September 30, 2013, are statutorily open to examination. NJR evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with unrecognized tax benefits. As of September 30, 2016 and 2015, based on its analysis, the Company determined there was no need to recognize any liabilities associated with uncertain tax positions. As of September 30, 2016, the Company has consolidated federal income tax net operating losses of approximately $78.7 million, which generally can be carried back two years and forward 20 years. Additionally, as of September 30, 2016, the Company has state income tax net operating losses of approximately $310.6 million, which generally have a life of 20 years. The Company has recorded deferred federal and state tax assets of approximately $45.7 million on the Consolidated Balance Sheets, reflecting the tax benefit associated with the loss carryforwards. In addition, as of September 30, 2016 and 2015, the Company has recorded a valuation allowance of $262,000 and $176,000, respectively, because it believes that it is more likely than not that the net operating losses related to CR&R will expire unused. In addition, as of September 30, 2016, the Company has an ITC/PTC carryforward of approximately $74 million, which has a life of 20 years. This carryforward will begin to expire in fiscal 2035. The Company expects to utilize this entire carryforward. The deferred tax assets will expire as follows:
(Thousands) |
Fiscal years 2017 - 2021 | $ | — |
Fiscal years 2022 - 2026 | — |
Fiscal years 2027 - 2031 | 835 |
Fiscal years 2032 - 2036 | 118,849 |
Total | $ | 119,684 |
In December 2015, the CAA extended the 30 percent ITC for solar property that is under construction on or before December 31, 2019. The credit will decline to 26 percent for property under construction during 2020, and to 22 percent for property under construction during 2021. For any property that is under construction before 2022, but not placed in service before 2024, the ITC will be reduced to 10 percent. In addition, the CAA retroactively extended the PTC for five years through December 31, 2019, with a gradual three-year phase out for any project for which construction of the facility begins after December 31, 2016. In September 2013, the U.S. Department of the Treasury and the IRS released final regulations that provide guidance on applying Section 263(a) of the Internal Revenue Code to amounts paid to acquire, produce, or improve tangible property, as well as rules for materials and supplies. Implementation of these final regulations in September 2013 had no material impact on NJR’s and its subsidiaries’ results of operations, financial condition or cash flow.

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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