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INCOME TAXES | 12 Months Ended
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Sep. 30, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | 13. 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, 2017, 2016 and 2015 is as follows:
(Thousands) | 2017 | 2016 | 2015
Statutory income tax expense | $ | 52,643 |  | $ | 54,321 |  | $ | 84,239 |
Change resulting from: |  |  |
State income taxes | 8,222 |  | 6,044 |  | 8,233 |
Cost of removal of assets placed in service prior to1981 | (6,886 | ) | (5,738 | ) | (5,149 | )
Investment/production tax credits | (34,526 | ) | (32,491 | ) | (30,096 | )
Basis adjustment of solar assets due to ITC | 4,256 |  | 4,453 |  | 4,861 |
AFUDC equity | (2,624 | ) | (1,531 | ) | (1,339 | )
Other | (2,742 | ) | (1,528 | ) | (1,025 | )
Income tax provision | $ | 18,343 |  | $ | 23,530 |  | $ | 59,724 |
Effective income tax rate | 12.2 | % | 15.2 | % | 24.8 | %
The income tax (benefit) provision from operations consists of the following:
(Thousands) | 2017 | 2016 | 2015
Current: |  |  |
Federal | $ | (16,023 | ) | $ | (23,597 | ) | $ | 20,492 |
State | 2,470 |  | (2,209 | ) | 5,473 |
Deferred: |  |  |
Federal | 54,965 |  | 70,386 |  | 56,480 |
State | 11,457 |  | 11,441 |  | 7,375 |
Investment/production tax credits | (34,526 | ) | (32,491 | ) | (30,096 | )
Income tax provision | $ | 18,343 |  | $ | 23,530 |  | $ | 59,724 |
The temporary differences, which give rise to deferred tax assets and (liabilities), consist of the following:
(Thousands) | 2017 |  | 2016
Deferred tax assets |  |  |
Investment tax credits (1) | $ | 111,642 |  |  | $ | 76,517 |
Deferred service contract revenue | 3,877 |  |  | 3,601 |
Incentive compensation | 6,260 |  |  | 8,128 |
Fair value of derivatives | 11,519 |  |  | 1,179 |
Federal net operating losses | 28,487 |  |  | 27,541 |
State net operating losses | 23,597 |  |  | 18,113 |
Overrecovered gas costs | — |  |  | 3,831 |
Other | 13,845 |  |  | 11,668 |
Total deferred tax assets | $ | 199,227 |  |  | $ | 150,578 |
Deferred tax liabilities |  |  |
Property related items | $ | (620,850 | ) |  | $ | (532,027 | )
Remediation costs | (11,625 | ) |  | (7,928 | )
Equity investments | (38,370 | ) |  | (37,740 | )
Postemployment benefits | (6,855 | ) |  | (7,902 | )
Conservation incentive plan | (7,195 | ) |  | (14,953 | )
Underrecovered gas costs | (4,035 | ) |  | — |
Other | (16,643 | ) |  | (14,610 | )
Total deferred tax liabilities | $ | (705,573 | ) |  | $ | (615,160 | )
Total net deferred tax liabilities | $ | (506,346 | ) |  | $ | (464,582 | )
(1) | Includes $2.3 million and $2.5 million for NJNG for fiscal 2017 and 2016, respectively, which is being amortized over the life of the related assets, and$109.3 million and $74 million for Clean Energy Ventures for fiscal 2017 and 2016, 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 Colorado, Connecticut, Delaware, Iowa, Kansas, Louisiana, Maryland, Montana, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Texas, Utah, Virginia and the City of New York. The Company neither files in, nor believes it has a filing requirement in, any foreign jurisdictions other than Canada. Due to certain available tax treaty benefits, the Company incurs no tax liability in Canada. 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, 2016. All periods subsequent to those ended September 30, 2013, are statutorily open to examination in all applicable states with the exception of New York. In New York, all periods subsequent to September 30, 2014, are statutorily open to examination. The Company evaluates its tax positions to determine the appropriate accounting and recognition of potential future obligations associated with unrecognized tax benefits. As of September 30, 2017 and 2016, based on its analysis, the Company determined there was no need to recognize any liabilities associated with uncertain tax positions. As of September 30, 2017 and 2016, the Company has consolidated federal income tax net operating losses of approximately $125.3 million and $78.7 million, respectively, which generally can be carried back two years and forward 20 years. The Company plans to exercise its ability to carryback its federal net operating losses. Additionally, as of September 30, 2017 and 2016, the Company has state income tax net operating losses of approximately $471.7 million and $310.6 million, respectively. These state net operating losses have varying carry forward periods dictated by the state in which they were incurred; these state carry forward periods range from seven to 20 years. The Company has recorded deferred federal and state tax assets of approximately $52.1 million and federal income tax receivables of approximately$15.4 million on the Consolidated Balance Sheets, reflecting the tax benefit associated with the loss carrybacks. The Company recorded a valuation allowance associated with state net operating loss carryforwards of $1 million related to NJRCEV in the state of Montana, as of September 30, 2017, and $262,000 related to CR&R in the state of New Jersey, as of September 30, 2016, which was deemed more likely than not to be realized prior to expiration and therefore was released during fiscal 2017. In addition, as of September 30, 2017, the Company has an ITC/PTC carryforward of approximately $109.3 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 2018 - 2022 | $ | 313 |
Fiscal years 2023 - 2027 | 1,051 |
Fiscal years 2028 - 2032 | 796 |
Fiscal years 2033 - 2037 | 159,237 |
Total | $ | 161,397 |
In December 2015, the Consolidated Appropriations Act 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 Consolidated Appropriations Act 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.

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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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