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Income Taxes | 6 Months Ended
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Mar. 31, 2018
Income Taxes [Abstract] |
Income Tax Disclosure [Text Block] | For the three and six months ended March 31, 2018, the Company’s effective tax rate of 3.1% and 147.2%, respectively, differed from the expected U.S. statutory tax rate of 35.0% and 21.0% for calendar 2017 and 2018, respectively, and was significantly impacted by the Tax Cuts and Jobs Act (the “Tax Reform Act”) and U.S. pretax losses in the Company’s Corporate and Other Segment where tax benefits are not more-likely-than-not to be realized resulting in the recording of valuation allowance. The Tax Reform Act reduces the U.S. corporate income tax rate from a maximum of 35.0% to a flat 21.0% rate, effective January 1, 2018. During the six months ended March 31, 2017, Spectrum Brands recorded a provisional $206.7 tax benefit for revaluation of U.S. deferred tax assets and liabilities and a provisional $78.0 of income tax expense for the one-time deemed mandatory repatriation for the six months ended March 31, 2018. Spectrum Brands also recognized a $10.4 benefit associated with the release of valuation allowance during the three months ended March 31, 2018. For the three and six months ended March 31, 2017, the Company’s effective tax rate of 148.1% and (146.5)%, respectively, differed from the expected U.S. statutory tax rate of 35.0% and was impacted by U.S. pretax losses in the Company’s Corporate and Other segment where the tax benefits are not more-likely-than-not to be realized resulting in the recording of valuation allowance. HRG At September 30, 2017, HRG had approximately $1,524.3 of gross U.S. Federal net operating loss (“NOL”) carryforwards (inclusive of $151.1 attributable to FGL’s non-life subsidiaries), which, if unused, will expire in tax years ending December 31, 2028 through 2037. At September 30, 2017, HRG had approximately $315.9 of gross U.S. Federal capital loss carryforwards (inclusive of $15.0 attributable to FGL’s non-life subsidiaries), which, if unused, will expire in tax years December 31, 2019 through 2022. Approximately $387.9 of HRG’s gross U.S. Federal NOL is subject to limitations under Sections 382 of the Internal Revenue Code. The majority of HRG’s NOL and capital loss carryforwards have historically been subject to valuation allowances, as HRG concluded that all or a portion of the related tax benefits are not more-likely-than-not to be realized. On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a dividends received deduction for dividends from foreign subsidiaries and imposing a tax on deemed repatriated accumulated earnings of foreign subsidiaries. The Tax Reform Act reduces the U.S. corporate income tax rate from a maximum of 35.0% to a flat 21.0% rate, effective January 1, 2018. HRG is a calendar year taxpayer, therefore HRG will be using the flat 21.0% rate for the January 1 to September 30, 2018 tax period and 35.0% for the October 1 to December 31, 2017 tax period. However, Spectrum Brands files its U.S. tax returns on a September fiscal year basis, its U.S. tax rate for Fiscal 2018 will be a blended rate of 24.53%. In response to the enactment of the Tax Reform Act, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for the transition adjustment for certain income tax effects of the Tax Reform Act. SAB 118 allows registrants to record provisional amounts during a one year measurement period in a manner similar to accounting for business combinations. The Company has followed the SAB 118 guidance. As a result of the new corporate tax rate, HRG is required to account for the effects of the change in tax law on its deferred tax balances as of the December 22, 2017 enactment date. HRG revalued its deferred tax balances applying the 21.0% tax rate based on the rate at which the deferred tax balances are expected to reverse in the future. As a result, HRG recognized a $287.2 reduction of tax benefits attributable to its net deferred tax assets. The reduction in tax benefits was fully offset by a reduction in the deferred tax asset valuation allowance. Accordingly, the revaluation of deferred at 21.0% has no impact on the accompanying Condensed Consolidated Statements of Operations for HRG, excluding Spectrum Brands, for the three and six months ended March 31, 2018. HRG’s valuation allowance at March 31, 2018 and September 30, 2017 totaled $441.2 and $703.2, respectively, (inclusive of $34.4 and $58.1, respectively, attributable to FGL’s non-life subsidiaries). The decrease in HRG’s valuation allowance was primarily due to the reduction of HRG’s deferred tax assets and liabilities as a result of the change in U.S. Federal tax rate, which is discussed further above. Spectrum Brands Spectrum Brands revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $206.7 tax benefit in its income from continuing operations for the six months ended March 31, 2018. Spectrum Brands determined the impact of the U.S. federal corporate income tax rate change on the U.S. deferred tax assets and liabilities is provisional because certain of the timing differences reversing at Spectrum Brands’ Fiscal 2018 blended rate must be estimated until the Fiscal 2018 reversing timing differences are known. During the three months ended March 31, 2018, Spectrum Brands released $4.9 of valuation allowance against its U.S. federal and state capital losses as a result of the announced sale of the GBL business to Energizer. Spectrum Brands also released $5.5 of valuation allowance against its U.S. state NOL deferred tax assets since the projected U.S. tax gain on the sale makes it more likely than not that the additional tax benefits will be realized. Spectrum Brands recognized the provisional tax impacts related to deemed repatriated earnings of $78.0 and the revaluation of deferred tax assets and liabilities mentioned above and included these amounts in the Condensed Consolidated Financial Statements for the six months ended March 31, 2018. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions Spectrum Brands has made, additional regulatory guidance that may be issued, and actions Spectrum Brands may take as a result of the Tax Reform Act. The accounting is expected to be complete when the Fiscal 2018 U.S. corporate income tax return is filed in 2019. As of March 31, 2018, Spectrum Brands recorded $35.9 of valuation allowance against its U.S. state NOLs. It remains unclear which of the Tax Reform Act provisions will be adopted by each of the U.S. states. State conformity to the provisions of the Tax Reform Act could have a material impact on the valuation allowance recorded on U.S. state NOLs. Spectrum Brands is actively marketing the HPC business and expects to consummate a sale prior to December 31, 2018. If the portion of the purchase price allocated to the U.S. is sufficient, there is a reasonable possibility that Spectrum Brands could release valuation allowance on $41.9 of federal NOLs currently subject to certain limits, and additional valuation allowance on U.S. state NOLs. Spectrum Brands does not have sufficient certainty around the purchase price or the amount that would be allocated to the U.S. to conclude that utilization of these net operating losses is more likely than not. The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits (“E&P”). Spectrum Brands had an estimated $613.1 of undistributed foreign E&P subject to the deemed mandatory repatriation and recognized a provisional $78.0 of income tax expense in its net income from continuing operations for the six months ended March 31, 2018. The mandatory repatriation tax is payable over eight years, with the first payment due January 2019, therefore $6.3 of the repatriation tax liability is classified as “Other current liabilities” and $71.7 as “Other long-term liabilities” in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2018. The provisional tax expense for the mandatory repatriation is based on currently available information and additional information needs to be prepared, obtained and analyzed in order to determine the final amount, including further analysis of certain foreign exchange gains or losses, earnings and profits, foreign tax credits, and estimated cash and cash equivalents as of the measurement dates in the Tax Reform Act. Tax effects for changes to these items will be recorded in a subsequent quarter, as discrete adjustments to Spectrum Brands’ income tax provision, once complete. The Tax Reform Act provides for additional limitations on the deduction of business interest expense, effective with Spectrum Brands’ Fiscal 2019 tax year. Unused interest deductions can be carried forward and may be used in future years to the extent the interest limitation is not exceeded in those periods. It is possible that a portion of Spectrum Brands’ future U.S. interest expense could be nondeductible and impact Spectrum Brands’ effective tax rate. The Tax Reform Act also contains additional limits on deducting compensation, including performance-based compensation, in excess of $1.0 paid to certain executive officers for any fiscal year, effective with Spectrum Brands’ Fiscal 2019 tax year. Spectrum Brands’ future compensation payments will be subject to these limits, which could impact Spectrum Brands’ effective tax rate. Spectrum Brands continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) on Spectrum Brands, which are not effective until fiscal year 2019. Spectrum Brands has not recorded any impact associated with either GILTI or BEAT in the tax rate for the six months ended March 31, 2018. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or treating such taxes as a current-period expense when incurred. Due to the complexity of calculating GILTI under the new law, Spectrum Brands has not determined which method they will apply. Spectrum Brands has recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in the Condensed Consolidated Financial Statements for the three and six months ended March 31, 2018. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions Spectrum Brands has made, additional regulatory guidance that may be issued, and actions Spectrum Brands may take as a result of the Tax Reform Act.

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