XML 34 R19.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our expense from income taxes from continuing operations consists of the following for the periods presented:
| Fiscal Year Ended September 30,
(In thousands) | 2018 |  | 2017 |  | 2016
Current federal | $ | 57 |  |  | $ | — |  |  | $ | — |
Current state | 512 |  |  | 859 |  |  | 595 |
Deferred federal (a) | 102,082 |  |  | 1,625 |  |  | 5,574 |
Deferred state (a) (b) | (8,167 | ) |  | 212 |  |  | 10,329 |
Total | $ | 94,484 |  |  | $ | 2,696 |  |  | $ | 16,498 |
(a) Fiscal 2018 federal deferred expense is primarily driven by the remeasurement of our deferred tax asset at the newly enacted 21.0% federal tax rate, partially offset by the release of the remaining valuation allowance on our federal deferred tax assets. Fiscal 2018 state benefit is primarily driven by the release of valuation allowance in certain operating jurisdictions; refer to discussion below titled “Valuation Allowance.” (b) Fiscal 2016 expense includes $8.6 million of additional valuation allowance on our state deferred tax assets due to a number of changes to the legal forms of our operating entities. This additional valuation allowance was for states that did not have a valuation allowance release in 2018. Refer to the discussion below titled “Valuation Allowance” for additional details. The expense from income taxes from continuing operations differs from the amount computed by applying the federal income tax statutory rate as follows for the periods presented:
| Fiscal Year Ended September 30,
(In thousands) | 2018 |  | 2017 |  | 2016
Income tax computed at statutory rate | $ | 12,112 |  |  | $ | 12,052 |  |  | $ | 7,596 |
State income taxes, net of federal benefit | 111 |  |  | 1,287 |  |  | 4,974 |
Deferred rate change | 110,071 |  |  | — |  |  | (678 | )
(Decrease) increase in valuation allowance - other (a) (b) (c) | (27,370 | ) |  | (3,482 | ) |  | 6,457 |
Changes for uncertain tax positions | 598 |  |  | (685 | ) |  | (40 | )
Stock based compensation | — |  |  | 741 |  |  | — |
Permanent differences | 2,133 |  |  | 496 |  |  | 400 |
Tax credits | (3,174 | ) |  | (7,460 | ) |  | (2,134 | )
Other, net | 3 |  |  | (253 | ) |  | (77 | )
Total | $ | 94,484 |  |  | $ | 2,696 |  |  | $ | 16,498 |
(a) For fiscal 2016, amount includes $8.6 million of additional valuation allowance on our state deferred tax assets due to a number of changes to the legal forms of our operating entities; refer to discussion below titled “Valuation Allowance.” (b) For fiscal 2017, amount includes a $3.5 million release of the valuation allowance on our state deferred tax assets due to changes in our state net operating loss estimates; refer to discussion below titled “Valuation Allowance.” (c) For fiscal 2018, amount includes a $27.4 million release of the valuation allowance on our federal and state deferred tax assets; refer to discussion below titled “Valuation Allowance.” Due to our fiscal year end, our fiscal provision was calculated using a blended 24.5% federal tax rate. The increase in permanent differences in fiscal 2018 compared to the prior fiscal year was largely driven by the limits on deductibility for executive compensation for current year incentive awards and anticipated limitations on unvested stock awards due to the enactment of the Tax Cuts and Jobs Act. The principal differences between our effective tax rate and the U.S. federal statutory rate relate to state taxes, changes in our valuation allowance and tax credits. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of our 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 as of September 30, 2018 and September 30, 2017:
(In thousands) | September 30, 2018 |  | September 30, 2017
Deferred tax assets: |  |  |
Federal and state tax carryforwards | $ | 196,702 |  |  | $ | 293,298 |
Inventory adjustments | 29,565 |  |  | 59,507 |
Incentive compensation | 11,959 |  |  | 19,043 |
Warranty and other reserves | 6,350 |  |  | 6,140 |
Property, equipment and other assets | 2,123 |  |  | 3,247 |
Other | 734 |  |  | 1,785 |
Uncertain tax positions | 734 |  |  | 1,332 |
Total deferred tax assets | 248,167 |  |  | 384,352 |
Deferred tax liabilities: |  |  |
Deferred revenues | — |  |  | (11,297 | )
Total deferred tax liabilities | — |  |  | (11,297 | )
Net deferred tax assets before valuation allowance | 248,167 |  |  | 373,055 |
Valuation allowance (a) | (34,212 | ) |  | (65,159 | )
Net deferred tax assets | $ | 213,955 |  |  | $ | 307,896 |
(a) For fiscal 2018, amount includes a $27.4 million release of the valuation allowance on our federal and state deferred tax assets. For fiscal 2017, amount includes a $3.5 million release of the valuation allowance on our state deferred tax assets due to changes in our state operating loss estimates; refer to discussion below titled “Valuation Allowance.” The Tax Cuts and Jobs Act (Tax Act) is comprehensive tax reform legislation that was enacted by the U.S. government on December 22, 2017. The Tax Act includes significant changes to the Internal Revenue Code, including a reduction in the corporate tax rate from 35.0% to 21.0%. Due to our fiscal year end, our fiscal 2018 provision was calculated using a blended 24.5% federal tax rate. The Tax Act contained additional changes that will impact our taxable income determinations, including, but not limited to, elimination of the corporate alternative minimum tax and a mechanism for refunding existing alternative minimum tax credits, and limitations on the deductibility of certain executive compensation. Although these provisions are not applicable until our fiscal 2019, we have recognized the impacts of the reduced federal tax rate and anticipated limitations on the deductibility of executive compensation in our fiscal 2018 provision. As of September 30, 2018, we have completed our analysis of the impacts of the Tax Act under SAB 118 with immaterial differences to our provisional amounts previously recorded. As of September 30, 2018, our gross deferred tax assets above included $133.2 million for federal net operating loss carryforwards, $39.6 million for state net operating loss carryforwards, $9.6 million for an alternative minimum tax credit and $17.7 million for general business credits. The net operating loss carryforwards expire at various dates through 2033, and the general business credits expire at various dates through 2038. The alternative minimum tax credit has an unlimited carryforward period. 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. Because the five-year period has expired, we have determined the actual impact and final classification of those amounts, which are properly reflected in the amounts presented above. The actual realization of our deferred tax assets is difficult to predict and is dependent on future events. We recognized income tax expense from continuing operations of $94.5 million in our fiscal 2018, compared to income tax expense from continuing operations of $2.7 million and $16.5 million in our fiscal 2017 and fiscal 2016, respectively. The income tax expense in our fiscal 2018 primarily resulted from income in the current year and the remeasurement of our deferred tax asset at a lower 21% federal tax rate, partially offset by the additional release of valuation allowance and the generation of additional federal tax credits. The income tax expense in our fiscal 2017 primarily resulted from income in the current year, offset by the generation of federal tax credits and an additional benefit resulting from changes to our valuation allowance due to changes in our state net operating loss estimates. In fiscal 2016, our income tax expense primarily resulted from income generated in the fiscal year, offset by the generation of federal tax credits. Due to the effects of changes in our valuation allowance on our deferred tax balance and changes in our unrecognized tax benefits, our effective tax rates in fiscal 2018, 2017, and 2016 are not meaningful metrics, as our income tax amounts were not directly correlated to the amount of our pretax income for those periods. Valuation Allowance 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. During fiscal 2016, we contemplated various tax planning strategies based on our operations profile. This planning resulted in a restructuring effort immediately following the close of our fiscal 2016, where we executed certain tax elections and a number of changes to the legal forms of our operating entities, which significantly reduced our income profile in certain state jurisdictions going forward. The restructuring reduced our effective tax rate in fiscal 2017 to an amount that is in-line with our peers, through a significant reduction in our state effective tax rate. In addition, the restructure provides cash tax savings in various jurisdictions where we no longer have significant state loss carryforwards available. In conjunction with the restructure, we also evaluated our ability to realize certain state components of our deferred tax asset. Given this change, we evaluated both positive and negative evidence, including consideration of a change in expected future taxable earnings in the separate state jurisdictions that will be impacted by the restructuring. Based on those evaluations, we recorded an additional $8.6 million in valuation allowance during the quarter ended September 30, 2016 for state deferred tax assets we concluded are no longer more likely than not to be realized. During fiscal 2017, we recorded additional impacts related to our tax elections and changes in legal form as further determinations were made throughout the year. These impacts included changes to our apportionment and deferred balances by jurisdiction, as well as changes to our uncertain tax positions. As a result, we recorded a decrease of $3.5 million in valuation allowance during the quarter ended September 30, 2017 for changes in our expected state net operating loss utilization due to changes in our uncertain tax positions. In fiscal 2018, we concluded that it was more likely than not that all of our federal tax attributes and additional portions of our state tax assets would be realized over their remaining recovery periods. This conclusion was based on an evaluation of all relevant evidence, both positive and negative, that would impact our ability to realize our deferred tax assets. The positive evidence included continued improvements in our pre-tax earnings profile, recent acquisitions and community count growth in future years, tax planning strategies, and increases to our future taxable income due to the enactment of the Tax Cuts and Jobs Act. The negative evidence included a number of factors within the homebuilding industry, notably recent market related impacts to costs of production, labor constraints, mortgage interest rate forecasts, and the position of the current housing cycle. We continue to maintain levels of backlog and community count to support our expectations of future profitability. During the current fiscal year, the Company completed its plan to repurchase portions of its outstanding debt, which altered its debt maturity and interest rate profile through new issuances and redemptions of prior issuances. The change in the Company's debt portfolio will create future interest expense savings that further support its estimates of future profitability. As of September 30, 2018, the Company will have to cumulatively generate approximately $768.0 million in pre-tax income over the course of its carryforward period to realize its deferred tax assets prior to their expiration, which, as previously discussed, is the Company's fiscal 2038. The valuation allowance of $34.2 million as of September 30, 2018 remains on various state attributes for which the Company has concluded it is not more likely than not that these attributes would be realized at that time. Unrecognized Tax Benefits A reconciliation of our unrecognized tax benefits is as follows for the beginning and end of each period presented:
| Fiscal Year Ended September 30,
(In thousands) | 2018 |  | 2017 |  | 2016
Balance at beginning of year | $ | 3,804 |  |  | $ | 4,541 |  |  | $ | 4,721 |
Additions for (reductions in) tax positions related to current year | — |  |  | 61 |  |  | (180 | )
Additions for tax positions related to prior years | — |  |  | 2,611 |  |  | — |
Reductions in tax positions of prior years | — |  |  | (2,273 | ) |  | — |
Lapse of statute of limitations | (310 | ) |  | (1,136 | ) |  | — |
Balance at end of year | $ | 3,494 |  |  | $ | 3,804 |  |  | $ | 4,541 |
If we were to recognize our $3.5 million of gross unrecognized tax benefits remaining as of September 30, 2018, substantially all would impact our effective tax rate. Additionally, we had $1.3 thousand and $1.4 thousand of accrued interest and penalties as of September 30, 2018 and 2017, respectively. Our income tax expense 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. Certain state income tax returns for various fiscal years are under routine examination. The statute of limitations for our major tax jurisdictions remains open for examination for fiscal years 2007 and subsequent years. As of September 30, 2018, it is reasonably possible that $21.6 thousand of our uncertain tax positions will reverse within the next twelve months.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration