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INCOME TAXES | 12 Months Ended
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Sep. 30, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income taxes have been based on the following components of Income before taxes:
| For the Years Ended September 30,
| 2016 |  | 2015 |  | 2014
Domestic | $ | 54,163 |  |  | $ | 54,515 |  |  | $ | (14,682 | )
Non-U.S. | (999 | ) |  | (879 | ) |  | 8,966 |
| $ | 53,164 |  |  | $ | 53,636 |  |  | $ | (5,716 | )
Provision (benefit) for income taxes on income was comprised of the following:
| For the Years Ended September 30,
| 2016 |  | 2015 |  | 2014
Current | $ | 15,072 |  |  | $ | 17,215 |  |  | $ | (408 | )
Deferred | 8,082 |  |  | 2,132 |  |  | (5,131 | )
Total | $ | 23,154 |  |  | $ | 19,347 |  |  | $ | (5,539 | )
U.S. Federal | $ | 14,261 |  |  | $ | 16,937 |  |  | $ | (6,486 | )
State and local | 3,482 |  |  | 3,215 |  |  | (291 | )
Non-U.S. | 5,411 |  |  | (805 | ) |  | 1,238 |
Total provision | $ | 23,154 |  |  | $ | 19,347 |  |  | $ | (5,539 | )
Griffon's Income tax provision for the year ended September 30, 2016 included a $2,193 benefit from the early adoption of the new FASB accounting guidance which now requires excess tax benefits from vesting of equity awards to be recognized within income tax expense. Under this guidance all excess tax benefits (“windfalls”) and deficiencies (“shortfalls”) related to employee stock compensation are recognized within income tax expense. Under prior guidance windfalls were recognized to Additional Paid In Capital and shortfalls were only recognized to the extent they exceed the pool of windfall tax benefits. Griffon’s Income tax provision included benefits of ($2,172) in 2016, ($517) in 2015, and ($4,429) in 2014 reflecting the reversal of previously recorded tax liabilities primarily due to the resolution of various tax audits and the closing of certain statutes for prior years’ tax returns. Differences between the effective income tax rate applied to Income and U.S. Federal income statutory rate were as follows:
| For the Years Ended September 30,
| 2016 |  | 2015 |  | 2014
U.S. Federal income tax provision (benefit) rate | 35.0 | % |  | 35.0 | % |  | (35.0 | )%
State and local taxes, net of Federal benefit | 4.1 | % |  | 4.9 | % |  | 17.5 | %
Non-U.S. taxes | 0.1 | % |  | (0.4 | )% |  | (35.8 | )%
Change in tax contingency reserves | (3.7 | )% |  | 0.3 | % |  | (36.0 | )%
Repatriation of foreign earnings | — | % |  | 0.9 | % |  | 4.7 | %
Change in valuation allowance | 3.9 | % |  | (4.7 | )% |  | 4.5 | %
Non-deductible/non-taxable items, net | 1.6 | % |  | (0.7 | )% |  | (3.4 | )%
Capitalized interest | 1.9 | % |  | — | % |  | — | %
Research and U.S. foreign tax credits | 4.8 | % |  | (0.5 | )% |  | (3.9 | )%
Deferred tax impact of state rate change | — | % |  | — | % |  | (4.5 | )%
FASB adoption and other categories | (4.1 | )% |  | — | % |  | — | %
Other | — | % |  | 1.3 | % |  | (5.0 | )%
Effective tax provision (benefit) rate | 43.6 | % |  | 36.1 | % |  | (96.9 | )%
The tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as follows:
| At September 30,
| 2016 |  | 2015
Deferred tax assets: |  |  |  |  |
Bad debt reserves | $ | 2,156 |  |  | $ | 2,083 |
Inventory reserves | 9,158 |  |  | 7,482 |
Deferred compensation (equity compensation and defined benefit plans) | 39,866 |  |  | 38,169 |
Compensation benefits | 5,770 |  |  | 6,186 |
Insurance reserve | 3,285 |  |  | 3,079 |
Restructuring reserve | 431 |  |  | 122 |
Warranty reserve | 2,352 |  |  | 2,288 |
Net operating loss | 31,732 |  |  | 24,089 |
Tax credits | 3,573 |  |  | 6,704 |
Other reserves and accruals | 4,238 |  |  | 5,206 |
| 102,561 |  |  | 95,408 |
Valuation allowance | (12,832 | ) |  | (10,462 | )
Total deferred tax assets | 89,729 |  |  | 84,946 |
Deferred tax liabilities: |  |  |  |  |
Deferred income | (3,389 | ) |  | (7,432 | )
Goodwill and intangibles | (72,907 | ) |  | (72,645 | )
Property, plant and equipment | (46,391 | ) |  | (35,382 | )
Interest | (496 | ) |  | (2,053 | )
Other | (551 | ) |  | (102 | )
Total deferred tax liabilities | (123,734 | ) |  | (117,614 | )
Net deferred tax liabilities | $ | (34,005 | ) |  | $ | (32,668 | )
The increase in the valuation allowance of $2,370 is primarily the result of a valuation allowance on accumulated Germany net operating losses resulting from management's assessment of current and future operational performance and related restructuring efforts partially offset by a release related to expired tax credits. The components of the net deferred tax liability, by balance sheet account, were as follows:
| At September 30,
| 2016 |  | 2015
Prepaid and other current assets | $ | — |  |  | $ | — |
Other assets | 7,274 |  |  | 5,778 |
Current liabilities | — |  |  | — |
Other liabilities | (41,925 | ) |  | (39,582 | )
Assets of discontinued operations | 646 |  |  | 1,136 |
Net deferred liability | $ | (34,005 | ) |  | $ | (32,668 | )
The Company adopted early the FASB issued guidance on simplifying the presentation of deferred income taxes, requiring deferred income tax liabilities and assets to be classified as non-current in the statement of financial position and applied it retrospectively for all periods presented in the financial statements. Accordingly, we reclassified current deferred taxes to non-current on the Consolidated Balance Sheet as of September 30, 2015 resulting in a decrease to both non-current deferred tax assets and non-current tax liabilities of $3,793 and $14,827, respectively. At both September 30, 2016 and 2015, Griffon has not recorded deferred income taxes on the undistributed earnings of its non-U.S. subsidiaries because of management’s ability and intent to indefinitely reinvest such earnings outside the U.S. At September 30, 2016, Griffon’s share of the undistributed earnings of the non-U.S. subsidiaries amounted to approximately $77,085. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries. At September 30, 2016 and 2015, Griffon had loss carryforwards for non-U.S. tax purposes of $93,548 and $68,591, respectively. The non-U.S. loss carryforwards are available for carryforward indefinitely. At September 30, 2016 and 2015, Griffon had state and local loss carryforwards of $104,254 and $99,094, respectively, which expire in varying amounts through 2036. At September 30, 2016 and 2015, Griffon had no federal loss carryforwards. At September 30, 2016 and 2015, Griffon had federal tax credit carryforwards of $3,199 and $6,223, respectively, which expire beginning in 2020. We believe it is more likely than not that the benefit from certain foreign net operating losses, state net operating losses and federal tax credits will not be realized. In recognition of this risk, we have provided a valuation allowance of $9,340 $1,752 and $1,740, respectively on the deferred tax assets relating to these foreign and state net operating loss carryforwards and federal credits. If our assumptions change and we determine we will be able to realize these foreign or state net operating loss carryforwards or federal credits, the benefits relating to the reversal of the valuation allowance will be recognized as a reduction of income tax expense. If certain substantial changes in Griffon's ownership occur, there would be an annual limitation on the amount of carryforward(s) that can be utilized. Griffon files U.S. Federal, state and local tax returns, as well as applicable returns in Germany, Canada, Brazil, Australia, Ireland and other non-U.S. jurisdictions. Griffon’s U.S. Federal income tax returns are no longer subject to income tax examination for years before 2012, Griffon's German income tax returns are no longer subject to income tax examination for years through 2010 and major U.S. state and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2011. Various U.S. state and non-U.S. statutory tax audits are currently underway. The following is a roll forward of unrecognized tax benefits:
Balance at September 30, 2014 | $ | 7,906 |
Additions based on tax positions related to the current year | 645 |
Reductions based on tax positions related to prior years | (252 | )
Lapse of Statutes | (448 | )
Balance at September 30, 2015 | 7,851 |
Additions based on tax positions related to the current year | 268 |
Reductions based on tax positions related to prior years | (1,079 | )
Lapse of Statutes | (1,085 | )
Balance at Balance at September 30, 2016 | $ | 5,955 |
If recognized, the amount of potential tax benefits that would impact Griffon’s effective tax rate is $1,438. Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At September 30, 2016 and 2015, the combined amount of accrued interest and penalties related to tax positions taken or to be taken on Griffon’s tax returns and recorded as part of the reserves for uncertain tax positions was $362 and $655, respectively. Griffon cannot reasonably estimate the extent to which existing liabilities for uncertain tax positions may increase or decrease within the next twelve months as a result of the progression of ongoing tax audits or other events. Griffon believes that it has adequately provided for all open tax years by tax jurisdiction.

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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 + Details
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