XML 29 R18.htm IDEA: XBRL DOCUMENT

Income Taxes

3 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

11.	Income Taxes

The Company's effective tax rate (ETR) from continuing operations was 23.8% for the three months ended December 31, 2018, and (2,609.5)% for the three months ended December 31, 2017. The quarterly ETR was significantly different from the Company's prior year ETR primarily as a result of the comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") enacted by the U.S. government on December 22, 2017, which reduced the Company's statutory federal tax rate from 35% to 21%. In addition, the Company's rate varied slightly from prior years as a result of state taxes, changes in the valuation allowance against state net operating losses, and changes in state apportionment and state statutory rates.

The Tax Act made broad and complex changes to the U.S. tax code that affected the Company's fiscal year ended September 30, 2018, including but not limited to (1) reducing the U.S. federal corporate tax rate, (2) changing rules related to uses and limitations of NOL carryforwards created in tax years beginning after December 31, 2017, (3) eliminating the corporate alternative minimum tax ("AMT") and changing how existing AMT credits can be realized, and (4) altering bonus depreciation rules that will allow for full expensing of qualified property. The Tax Act reduced the federal corporate tax rate to 21% in the Company's fiscal year ended September 30, 2018 for the period beginning after December 31, 2017. For the fiscal year ending September 30, 2019, and onward, the applicable federal corporate tax rate is 21%.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The one year measurement period ended during the Company's first quarter ended December 31, 2018. As a result, the Company has finalized provisional amounts originally recorded in connection with the Tax Act.

In connection with the Company's initial analysis of the impact of the Tax Act, it has recorded a discrete net tax benefit of $22.4 million in the period ended September 30, 2018. The Company recorded the $22.4 million impact for the three months ended December 31, 2017, the first quarter of the fiscal year ended September 30, 2018. The Company has completed its accounting for the income tax effects of the Tax Act.

The Company's accounting for the Tax Act was completed as follows:

Reduction of U.S. federal corporate tax rate: The Act reduces the corporate tax rate to 21%, effective January 1, 2018. In the fourth quarter of the period ended September 30, 2018, the Company completed its analysis to determine the effect of the reduction of the U.S. federal corporate tax rate and recorded an adjustment of $0.9 million from the amount recorded in the first quarter of the fiscal year. Consequently, the effect for the fiscal year ended September 30, 2018 was a decrease related to the Company's net deferred tax liabilities of $22.0 million, excluding the valuation allowance. The Company also calculated an increase to its valuation allowance of $0.5 million due to the rate change. The Company recorded a corresponding net adjustment to its deferred income tax benefit of $21.5 million for the period ended September 30, 2018 as part of its completion of the accounting for Tax Act.

Elimination of Corporate AMT and Refund of AMT Credits: For tax years beginning after December 31, 2017, the corporate AMT was repealed. The Act allows the use of existing corporate AMT credits to offset regular tax liability for tax years after December 31, 2017. AMT credits in excess of regular liability are refundable in the years 2018 through 2021. At December 31, 2018, the Company had $2.5 million of AMT credits, all of which is expected to be refunded. The Company has reclassified the AMT credits to long-term receivable. In the fourth quarter of the year ended September 30, 2018, the Company had accounted for a potential sequestration of its AMT credit receivable by recording a provisional tax expense of $0.1 million for the estimated sequestration amounts withheld from its AMT credit carryovers. As a result of the IRS's recent announcement regarding Section 53(e), the Company is no longer subject to the sequestration previously mandated, and has reversed the estimated $0.1 million sequestration accrual recorded for the tax year ended September 30, 2018, resulting in an income tax benefit of $0.1 million for the tax year ended September 30, 2019. This benefit was recorded in the three months ended December 31, 2018.

Valuation allowances: The Company determined whether the federal and state valuation allowance assessments were affected by various aspects of the Tax Act. Any corresponding determinations relating to changes in valuation allowances have, likewise, been completed with no changes identified with respect to the provisional amounts recorded.

As of September 30, 2018, the Company had aggregate federal and state net operating loss carryforwards of approximately $415.1 million and $199.6 million, respectively, which expire in 2027-2037 and 2019-2038, respectively. Approximately $0.9 million of state net operating loss carryforwards are expiring in 2019.