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Income Taxes | 12 Months Ended
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Sep. 30, 2012
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The provision (benefit) for income taxes from continuing operations consists of the following (in thousands):
| Fiscal Year Ended September 30,
| 2012 |  | 2011 |  | 2010
Current federal | $ | (34,242 | ) |  | $ | (1,963 | ) |  | $ | (4,528 | )
Current state | (143 | ) |  | 319 |  |  | 65 |
Deferred federal | (5,964 | ) |  | 3,728 |  |  | (114,151 | )
Deferred state | 2 |  |  | 1,282 |  |  | 259 |
Total | $ | (40,347 | ) |  | $ | 3,366 |  |  | $ | (118,355 | )
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,
| 2012 |  | 2011 |  | 2010
Income tax computed at statutory rate | $ | (61,590 | ) |  | $ | (68,886 | ) |  | $ | (51,774 | )
State income taxes, net of federal benefit | (6,055 | ) |  | (4,613 | ) |  | (5,756 | )
Valuation allowance | 59,601 |  |  | 74,047 |  |  | (65,689 | )
(Decrease) increase in unrecognized tax benefits | (32,441 | ) |  | 1,511 |  |  | 3,108 |
Other, net | 138 |  |  | 1,307 |  |  | 1,756 |
Total | $ | (40,347 | ) |  | $ | 3,366 |  |  | $ | (118,355 | )
The principal difference between our effective tax rate and the U.S. federal statutory rate relates to our valuation allowance and the recognition of prior year unrecognized tax benefits. 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 assets are as follows (in thousands):
| September 30, 2012 |  | September 30, 2011
Deferred tax assets: |  |  |
Warranty and other reserves | $ | 12,408 |  |  | $ | 11,752 |
Incentive compensation | 16,285 |  |  | 15,338 |
Property, equipment and other assets | 2,647 |  |  | 2,734 |
Federal and state tax carryforwards | 365,283 |  |  | 305,909 |
Inventory adjustments | 133,843 |  |  | 143,746 |
Uncertain tax positions | 16,331 |  |  | 45,303 |
Other | 4,285 |  |  | 11,315 |
Total deferred tax assets | 551,082 |  |  | 536,097 |
Deferred tax liabilities: |  |  |
Deferred revenues | (56,017 | ) |  | (54,052 | )
Total deferred tax liabilities | (56,017 | ) |  | (54,052 | )
Net deferred tax assets before valuation allowance | 495,065 |  |  | 482,045 |
Valuation allowance | (488,217 | ) |  | (479,285 | )
Net deferred tax assets | $ | 6,848 |  |  | $ | 2,760 |
At September 30, 2012, our gross deferred tax assets above included $273.5 million for federal net operating loss carryforwards, $81.9 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 2032. The alternative minimum tax credit has an unlimited carryforward period. 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, 2012 and 2011, the Company's deferred tax asset valuation allowance was $488.2 million and $479.3 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 2012 and 2011, we reduced our gross deferred tax assets and corresponding valuation allowance by $15.6 million and $0.9 million, respectively. 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. Accordingly, a portion of our $551 million of total gross deferred tax assets related to accrued losses on our inventory may be unavailable due to the limitation imposed by Section 382. As of September 30, 2012, we estimate that between $58.7 million and $117.8 million may be unavailable due to our Section 382 limitation. As a result, upon the resumption of sustained profitability and reversal of our valuation allowance, between $377.2 million and $436.3 million of our net deferred tax assets may be available to us for the reduction of future cash taxes. The actual realization of our deferred tax assets is difficult to predict and will be dependent on future events. We expect to continue to add to our gross deferred tax assets for anticipated NOLs that will not be limited by Section 382. Considering the limitation imposed by Section 382, the table below depicts the classifications of our deferred tax assets:
| September 30, 2012
| (in thousands)
Deferred tax assets: |
Subject to annual limitation | $ | 87,441 |
Generally not subject to annual limitation | 345,839 |
Certain components likely to be subject to annual limitation | 117,802 |
Total deferred tax assets | 551,082 |
Deferred tax liabilities | (56,017 | )
Net deferred tax assets before valuation allowance | 495,065 |
Valuation allowance | (488,217 | )
Net deferred tax assets | $ | 6,848 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits at the beginning and end of fiscal 2012, 2011 and 2010 is as follows (in thousands):
| Fiscal Year Ended September 30,
| 2012 |  | 2011 |  | 2010
Balance at beginning of year | $ | 46,648 |  |  | $ | 47,271 |  |  | $ | 41,848 |
Additions for (reductions in) tax positions related to current year | 903 |  |  | (1,624 | ) |  | (3,435 | )
Additions for tax positions related to prior years | — |  |  | 1,563 |  |  | 11,533 |
Reductions for tax positions of prior years | (27,181 | ) |  | (252 | ) |  | (289 | )
Settlements with taxing authorities | — |  |  | (310 | ) |  | (319 | )
Lapse of statute of limitations | (740 | ) |  | — |  |  | (2,067 | )
Balance at end of year | $ | 19,630 |  |  | $ | 46,648 |  |  | $ | 47,271 |
Due to our valuation allowance, if the Company were to recognize the $19.6 million of gross unrecognized tax benefits, substantially all would affect our effective tax rate. Additionally, we had $2.5 million and $8.2 million of accrued interest and penalties at September 30, 2012 and 2011, 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 2007 and subsequent years. The final outcome of these examinations is not yet determinable and therefore the change that could occur in our unrecognized tax benefits within the next 12 months cannot be estimated at this time.

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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 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 2: 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 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 7: 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 8: 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 + Details
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