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Income Taxes | 12 Months Ended
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Sep. 30, 2011
Income Taxes [Abstract] |
Income Taxes |
(9) | Income Taxes
The provision (benefit) for income taxes from continuing operations consists of the following (in thousands):
|  | Fiscal Year Ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Current federal |  | $ | (1,963 | ) |  | $ | (4,528 | ) |  | $ | (12,844 | )
Current state |  |  | 319 |  |  |  | 65 |  |  |  | (162 | )
Deferred federal |  |  | 3,728 |  |  |  | (114,151 | ) |  |  | 1,459 |
Deferred state |  |  | 1,282 |  |  |  | 259 |  |  |  | 3,197 |
Total |  | $ | 3,366 |  |  | $ | (118,355 | ) |  | $ | (8,350 | )
The provision (benefit) for income taxes from continuing operations differs from the amount computed by applying the federal income tax statutory rate as follows (in thousands):
|  | Fiscal Year Ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Income tax computed at statutory rate |  | $ | (68,886 | ) |  | $ | (51,774 | ) |  | $ | (63,623 | )
State income taxes, net of federal benefit |  |  | (4,613 | ) |  |  | (5,756 | ) |  |  | (2,936 | )
Penalties |  |  | — |  |  |  | — |  |  |  | 5,146 |
Impairment of non-deductible goodwill |  |  | — |  |  |  | — |  |  |  | 5,157 |
Valuation allowance |  |  | 74,047 |  |  |  | (65,689 | ) |  |  | 42,736 |
Increase in unrecognized tax benefits |  |  | 1,511 |  |  |  | 3,108 |  |  |  | 12,143 |
Other, net |  |  | 1,307 |  |  |  | 1,756 |  |  |  | (6,973 | )
Total |  | $ | 3,366 |  |  | $ | (118,355 | ) |  | $ | (8,350 | )
The principal difference between our effective rate and the U.S. federal statutory rate relates to our valuation allowance. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows (in thousands):
|  | September 30, |
|  | 2011 |  |  | 2010 |
Deferred tax assets: |  |  |  |  |  |  |  |
Warranty and other reserves |  | $ | 11,752 |  |  | $ | 15,316 |
Incentive compensation |  |  | 15,338 |  |  |  | 19,170 |
Property, equipment and other assets |  |  | 2,734 |  |  |  | 2,137 |
Federal and state tax carryforwards |  |  | 305,909 |  |  |  | 206,119 |
Inventory adjustments |  |  | 143,746 |  |  |  | 183,235 |
FIN 48 |  |  | 45,303 |  |  |  | 39,279 |
Other |  |  | 11,315 |  |  |  | 3,578 |
Total deferred tax assets |  |  | 536,097 |  |  |  | 468,834 |
Deferred tax liabilties: |  |  |  |  |  |  |  |
Deferred revenues |  |  | (54,052 | ) |  |  | (57,247 | )
Total deferred tax liabilities |  |  | (54,052 | ) |  |  | (57,247 | )
Net deferred tax assets before valuation allowance |  |  | 482,045 |  |  |  | 411,587 |
Valuation allowance |  |  | (479,285 | ) |  |  | (403,808 | )
Net deferred tax assets |  | $ | 2,760 |  |  | $ | 7,779 |
At September 30, 2011, our gross deferred tax assets above included $224.4 million for federal net operating loss carryforwards, $71.7 million for state net operating loss carryforwards and $9.8 million for an alternative minimum tax credit. The net operating loss carryforwards expire at various dates through 2031. A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the more-likely-than-not realization threshold criterion. In the assessment for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, the Company’s experience with loss carryforwards not expiring unused and tax planning alternatives. Based upon an evaluation of all available evidence, we established a valuation allowance for substantially all of our deferred tax assets during fiscal 2008. Given the prolonged economic downturn affecting the homebuilding industry and the continued uncertainty regarding the recoverability of the remaining deferred tax assets, we continue to believe that a valuation allowance is needed for substantially all of our deferred tax assets. Therefore, at September 30, 2011 and 2010, the Company’s deferred tax asset valuation allowance was $479.3 million and $403.8 million, respectively. In future periods, the allowance could be modified based on sufficient evidence indicating that more likely than not a portion of our deferred tax assets will be realized. Changes in existing tax laws could also affect actual tax results and the valuation of deferred tax assets over time. Further, we experienced an “ownership change” as defined in Section 382 of the Internal Revenue Code (Section 382) as of January 12, 2010. Section 382 contains rules that limit the ability of a company that undergoes an “ownership change” to utilize its net operating loss carryforwards (NOLs) and certain built-in losses or deductions recognized during the five-year period after the ownership change to offset future taxable income. Therefore, our ability to utilize our pre-ownership change net operating loss carryforwards and recognize certain built-in losses or deductions is limited by Section 382 to an estimated maximum amount of approximately $11.4 million ($4 million tax-effected) annually. Certain deferred tax assets are not subject to any limitation imposed by Section 382. Due to the Section 382 limitation and the maximum carryforward period of our NOLs, we are unable to fully recognize certain deferred tax assets. Accordingly, during fiscal 2011 and 2010, we reduced our gross deferred tax assets and corresponding valuation allowance by $0.9 million and $5.9 million, respectively. As of September 30, 2010, we had disclosed that up to $183.2 million of gross deferred tax assets related to accrued losses on our inventory may have been unavailable due to the limitation imposed by Section 382. Based on certain economic results during fiscal 2011, we have revised our previous estimate and, after adjusting for certain state NOLs and other deferred tax assets which may not be recoverable, we now estimate that up to $157.4 million of gross deferred tax assets may be unavailable due to the limitation imposed by Section 382. However, based on our annual assessment, our current realization projections for our built in losses support that only $70.1 million of our deferred tax asset is likely to be unavailable under Section 382. As future economic conditions unfold, we will be able to confirm that certain deferred tax assets will not provide any future tax benefit. At such time, we will accordingly remove any deferred tax asset and corresponding valuation allowance. Considering the limitation imposed by Section 382, the table below depicts the classifications of our deferred tax assets:
|  | September 30, |
|  | 2011 |
|  | (In millions) |
Deferred tax assets: |  |  |  |
Subject to annual limitation |  | $ | 83.5 |
Generally not subject to annual limitation |  |  | 295.2 |
Certain components likely to be subject to annual limitation |  |  | 157.4 |
Total deferred tax assets |  |  | 536.1 |
Deferred tax liabilities |  |  | (54.0 | )
Net deferred tax assets before valuation allowance |  |  | 482.1 |
Valuation allowance |  |  | (479.3 | )
Net deferred tax assets |  | $ | 2.8 |
Therefore, based on the classification of which deferred tax assets are likely to be impacted by our annual limitation, as of September 30, 2011, we had deferred tax assets, net of $54.0 million of deferred tax liabilities, of $482.1 million. While the actual realization of the deferred tax assets is difficult to predict and is dependent on future events, as evidenced by our current valuation allowance, we currently anticipate that between $324.7 million and $412.0 million of these deferred tax assets may be available even after consideration of the Section 382 imposed limitation. Further, we expect to continue to add to our gross deferred tax assets for anticipated NOLs that will not be limited by Section 382. A reconciliation of the beginning and ending amount of unrecognized tax benefits at the beginning and end of fiscal 2011, 2010 and 2009 is as follows (in thousands):
|  | Fiscal Year Ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Balance at beginning of year |  | $ | 47,271 |  |  | $ | 41,848 |  |  | $ | 57,916 |
Reductions in tax positions related to current year |  |  | (1,624 | ) |  |  | (3,435 | ) |  |  | (3,527 | )
Additions for tax positions related to prior years |  |  | 1,563 |  |  |  | 11,533 |  |  |  | 211 |
Reductions for tax positions of prior years |  |  | (252 | ) |  |  | (289 | ) |  |  | (219 | )
Settlements with taxing authorities |  |  | (310 | ) |  |  | (319 | ) |  |  | (8,572 | )
Lapse of statute of limitations |  |  | — |  |  |  | (2,067 | ) |  |  | (3,961 | )
Balance at end of year |  | $ | 46,648 |  |  | $ | 47,271 |  |  | $ | 41,848 |
If the Company were to recognize the $46.6 million of gross unrecognized tax benefits, substantially all of which would affect our effective tax rate. The Company expects the total amount of unrecognized tax benefits to decrease by $27.2 million, resulting in a non-cash tax benefit, within twelve months as a result of tax planning, settlements with various taxing authorities and the expiration of certain statutes of limitations. Additionally, we had $8.2 million and $6.0 million of accrued interest and penalties at September 30, 2011 and 2010, respectively. Our income tax benefit includes tax related interest. In the normal course of business, we are subject to audits by federal and state tax authorities regarding various tax liabilities. The IRS is currently conducting a routine examination of our federal income tax returns for fiscal year 2007 through 2010, and certain state taxing authorities are examining various fiscal years. The statute of limitations for our major tax jurisdictions remains open for examination for fiscal years 2006 and subsequent years.

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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 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: 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 6: 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 7: 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 8: 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=6881521&loc=d3e23780-122690 + Details
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