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Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of income before income taxes from continuing operations are presented below.
| 2017 |  | 2016 |  | 2015
| (in millions)
U.S. | $ | 82.7 |  |  | $ | 69.7 |  |  | $ | 25.2 |
Non-U.S. | (4.2 | ) |  | (0.4 | ) |  | (4.4 | )
Income before income taxes | $ | 78.5 |  |  | $ | 69.3 |  |  | $ | 20.8 |
The cumulative amount of undistributed earnings of foreign subsidiaries that we consider to be indefinitely reinvested, and thus for which United States income taxes have not been provided, was $52.4 million at September 30, 2017. It is not currently practical to estimate the amount of unrecognized United States income taxes that might be payable on the repatriation of these earnings. The components of income tax expense from continuing operations are presented below.
| 2017 |  | 2016 |  | 2015
| (in millions)
Current: |  |  |  |  |
U.S. federal | $ | 25.4 |  |  | $ | 28.9 |  |  | $ | 3.1 |
U.S. state and local | 4.0 |  |  | 2.0 |  |  | 0.2 |
Non-U.S. | 0.5 |  |  | (0.1 | ) |  | — |
| 29.9 |  |  | 30.8 |  |  | 3.3 |
Deferred: |  |  |  |  |
U.S. federal | (4.3 | ) |  | (9.8 | ) |  | 2.8 |
U.S. state and local | (0.2 | ) |  | 3.4 |  |  | 2.7 |
Non-U.S. | (1.2 | ) |  | (0.2 | ) |  | (0.5 | )
| (5.7 | ) |  | (6.6 | ) |  | 5.0 |
Income tax expense | $ | 24.2 |  |  | $ | 24.2 |  |  | $ | 8.3 |
The reconciliation between income tax expense at the U.S. federal statutory income tax rate and reported income tax expense from continuing operations is presented below.
| 2017 |  | 2016 |  | 2015
| (in millions)
Expense at U.S. federal statutory income tax rate of 35% | $ | 27.5 |  |  | $ | 24.3 |  |  | $ | 7.3 |
Adjustments to reconcile to income tax expense: |  |  |  |  |
State income taxes, net of federal benefit | 2.7 |  |  | 3.1 |  |  | 2.0 |
Domestic production activities deduction | (4.5 | ) |  | (3.0 | ) |  | (0.5 | )
Tax credits | (1.4 | ) |  | (2.0 | ) |  | (1.4 | )
Nondeductible expenses, other than compensation | 0.6 |  |  | 0.7 |  |  | 0.6 |
Federal valuation allowance | 0.4 |  |  | — |  |  | 0.5 |
Foreign income taxes | 0.3 |  |  | 0.2 |  |  | 0.4 |
Nondeductible compensation | 0.5 |  |  | 0.4 |  |  | 0.3 |
State tax rate change | (0.4 | ) |  | 0.4 |  |  | — |
Excess tax benefits related to stock compensation | (2.1 | ) |  | (0.5 | ) |  | — |
Other | 0.6 |  |  | 0.6 |  |  | (0.9 | )
Income tax expense | $ | 24.2 |  |  | $ | 24.2 |  |  | $ | 8.3 |
Deferred income tax balances are presented below.
| September 30,
| 2017 |  | 2016
| (in millions)
Deferred income tax assets: |  |  |
Inventory reserves | $ | 12.0 |  |  | $ | 14.8 |
Accrued expenses | 14.9 |  |  | 15.0 |
Pension and other postretirement benefits | 6.0 |  |  | 25.0 |
Stock-based compensation | 6.2 |  |  | 7.7 |
State net operating losses | 3.2 |  |  | 5.0 |
Federal credit carryovers | 0.9 |  |  | 0.6 |
Other | 2.7 |  |  | 4.8 |
| 45.9 |  |  | 72.9 |
Valuation allowance | (1.5 | ) |  | (0.9 | )
Total deferred income tax assets, net of valuation allowance | 44.4 |  |  | 72.0 |
Deferred income tax liabilities: |  |  |
Intangible assets | 151.2 |  |  | 177.0 |
Other | 7.2 |  |  | 3.8 |
Total deferred income tax liabilities | 158.4 |  |  | 180.8 |
Net deferred income tax liabilities | $ | 114.0 |  |  | $ | 108.8 |
Balance sheet presentation: |  |  |
Deferred income taxes | $ | 115.1 |  |  | $ | 109.9 |
Less deferred tax assets included in other noncurrent assets | 1.1 |  |  | 1.1 |
Net deferred income tax liabilities | $ | 114.0 |  |  | $ | 108.8 |
We reevaluate the need for a valuation allowance against the U.S. deferred tax assets each quarter, considering results to date, projections of taxable income, tax planning strategies and reversing taxable temporary differences. Our state net operating loss carryforwards, which expire between calendar years 2018 and 2033, remain available to offset future taxable earnings. The following table summarizes information concerning our gross unrecognized tax benefits.
| 2017 |  | 2016
| (in millions)
Balance at beginning of year | $ | 2.8 |  |  | $ | 2.6 |
Increases related to prior year positions | 0.1 |  |  | 0.3 |
Increases related to current year positions | 0.2 |  |  | 0.2 |
Decreases due to lapse in statute of limitations | (0.1 | ) |  | (0.3 | )
Balance at end of year | $ | 3.0 |  |  | $ | 2.8 |
Substantially all unrecognized tax benefits would, if recognized, impact the effective tax rate. We recognize interest related to uncertain tax positions as interest expense and recognize any penalties incurred as a component of selling, general and administrative expenses. At September 30, 2017 and 2016, we had $0.7 million and $0.5 million, respectively, of accrued interest expense related to unrecognized tax benefits. We expect to settle certain state income tax audits within the next 12 months and believe it is reasonably possible that these audit settlements will reduce the gross unrecognized tax benefits by $0.8 million. The federal income tax returns for Mueller Co. and Anvil are closed for years prior to 2005 and for Mueller Water Products, Inc. for 2007 and 2008. Our 2009 through 2012 returns are closed except to the extent net operating losses from those years have been utilized on subsequent years’ returns. Tax years 1980 to 1994 and 1999 to 2001 remain open for our predecessor company, U.S. Pipe, which was a subsidiary of Walter Energy in those years. See Note 17. We also remain liable for any taxes related to periods prior to the sale of U.S. Pipe in 2012 pursuant to the terms of the sale agreement with the purchaser of the segment. Our state income tax returns are generally closed for years prior to 2012, except to the extent of our state net operating loss carryforwards. Our Canadian income tax returns are generally closed for years prior to 2009. We are currently under audit by several jurisdictions at various levels of completion. We do not have any material unpaid assessments.

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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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