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INCOME TAXES | 12 Months Ended
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Sep. 30, 2014
INCOME TAXES |
INCOME TAXES | 11.INCOME TAXES The components of income (loss) before income taxes, after adjusting the income (loss) for non-controlling interests, are as follows:
|  | Year ended September 30,
|  | 2014 |  | 2013
United States |  |  | $ | (629,000 | ) |  |  | $ | (4,832,000 | )
Canada |  |  | 1,905,000 |  |  |  | (5,228,000 | )
|  |  | $ | 1,276,000 |  |  |  | $ | (10,060,000 | )
The components of the income tax provision (benefit) related to the above income (loss) are as follows:
|  | Year ended September 30,
|  | 2014 |  | 2013
Current (benefit) provision: |  |  |  |  |  |  |  |
United States – Federal |  |  |  |  |  |  |  |
Before operating loss carryforwards |  |  | $ | 886,000 |  |  |  | $ | - |
Benefit of operating loss carryforwards |  |  | (886,000 | ) |  |  | - |
After operating loss carryforwards |  |  | - |  |  |  | - |
United States – State |  |  | (1,000 | ) |  |  | (82,000 | )
|  |  | (1,000 | ) |  |  | (82,000 | )
Canadian |  |  | 1,312,000 |  |  |  | 45,000 |
Total current |  |  | 1,311,000 |  |  |  | (37,000 | )
Deferred benefit: |  |  |  |  |  |  |  |
United States |  |  | - |  |  |  | 82,000 |
Canadian |  |  | (707,000 | ) |  |  | (1,542,000 | )
Total deferred |  |  | (707,000 | ) |  |  | (1,460,000 | )
|  |  | $ | 604,000 |  |  |  | $ | (1,497,000 | )
Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that Canadian taxable income is not sheltered by U.S. source losses, Canadian income taxes are not estimated to have a current or future benefit as foreign tax credits or deductions for U.S. tax purposes, and U.S. consolidated net operating losses are not estimated to have any future U.S. tax benefit prior to expiration. A reconciliation between the reported income tax provision (benefit) and the amount computed by multiplying the loss attributable to Barnwell before income taxes by the U.S. federal tax rate of 35% is as follows:
|  | Year ended September 30,
|  | 2014 |  | 2013
Tax provision (benefit) computed by applying statutory rate |  |  | $ | 447,000 |  |  |  | $ | (3,521,000 | )
Increase in the valuation allowance |  |  | 615,000 |  |  |  | 2,978,000 |
Additional effect of the foreign tax provision on the total tax provision |  |  | (467,000 | ) |  |  | (1,018,000 | )
Expiration of foreign tax credit carryforward |  |  | - |  |  |  | 249,000 |
State income tax benefit |  |  | (31,000 | ) |  |  | (365,000 | )
Other |  |  | 40,000 |  |  |  | 180,000 |
|  |  | $ | 604,000 |  |  |  | $ | (1,497,000 | )
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
|  | September 30,
|  | 2014 |  | 2013
Deferred income tax assets: |  |  |  |  |  |  |  |
U.S. tax effect of deferred Canadian taxes |  |  | $ | 248,000 |  |  |  | $ | 526,000 |
Foreign tax credit carryover |  |  | 3,023,000 |  |  |  | 1,715,000 |
Alternative minimum tax credit carryover |  |  | 460,000 |  |  |  | 460,000 |
U.S. federal net operating loss carryover |  |  | 4,017,000 |  |  |  | 4,903,000 |
Tax basis of investment in land and residential real estate in excess of book basis |  |  | 1,842,000 |  |  |  | 1,756,000 |
Property and equipment accumulated tax depreciation and depletion in excess of book under U.S. tax law |  |  | 4,069,000 |  |  |  | 5,196,000 |
Liabilities accrued for books but not for tax under U.S. tax law |  |  | 5,112,000 |  |  |  | 4,338,000 |
Liabilities accrued for books but not for tax under Canadian tax law |  |  | 2,731,000 |  |  |  | 2,409,000 |
Other |  |  | 2,098,000 |  |  |  | 2,085,000 |
Total gross deferred tax assets |  |  | 23,600,000 |  |  |  | 23,388,000 |
Less valuation allowance |  |  | (20,869,000 | ) |  |  | (20,979,000 | )
Net deferred income tax assets |  |  | 2,731,000 |  |  |  | 2,409,000 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Property and equipment accumulated tax depreciation and depletion in excess of book under Canadian tax law |  |  | (3,460,000 | ) |  |  | (3,957,000 | )
Other |  |  | (94,000 | ) |  |  | (95,000 | )
Total deferred income tax liabilities |  |  | (3,554,000 | ) |  |  | (4,052,000 | )
Net deferred income tax liability |  |  | $ | (823,000 | ) |  |  | $ | (1,643,000 | )
Net deferred income tax liability is included in the Consolidated Balance Sheets as follows:
|  | September 30,
|  | 2014 |  | 2013
Current deferred income tax asset |  |  |  |  |  |  |  |
(included in other current assets) |  |  | $ | 378,000 |  |  |  | $ | 247,000 |
Deferred income tax liability |  |  | (1,201,000 | ) |  |  | (1,890,000 | )
Net deferred income tax liability |  |  | $ | (823,000 | ) |  |  | $ | (1,643,000 | )
The total valuation allowance decreased $110,000 for the year ended September 30, 2014. The decrease was due primarily to a decrease in the valuation allowance for U.S. federal net operating loss carryovers resulting from the partial usage of such carryovers due to taxable income from the sales of joint venture investments and oil and natural gas properties in the current year, and a decrease in the valuation allowance for deferred tax assets related to property and equipment under U.S. tax law due to changes in the associated temporary differences. The decreases were partially offset by an increase in the valuation allowance for foreign tax credit carryforwards which are not more likely than not to have a future tax benefit. Of the total decrease in the valuation allowance for fiscal 2014, $615,000 was recognized as income tax expense and $725,000 was credited to accumulated other comprehensive loss. Net deferred tax assets at September 30, 2014 of $2,731,000 consists of Canadian deferred tax assets related to liabilities accrued for book purposes but not for tax purposes that are estimated to be realized through future Canadian income tax deductions against future Canadian oil and natural gas earnings. At September 30, 2014, Barnwell had foreign tax credit carryovers, alternative minimum tax credit carryovers, and U.S. federal net operating loss carryovers totaling $3,023,000, $460,000 and $11,816,000, respectively. All three items were fully offset by valuation allowances at September 30, 2014. The net operating loss carryovers expire in fiscal years 2031-2033, and the foreign tax credit carryovers expire in fiscal years 2017-2024. FASB ASC Topic 740, Income Taxes, prescribes a threshold for recognizing the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority. Barnwell files U.S. federal income tax returns, income tax returns in various U.S. states, and Canadian federal and provincial tax returns. A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the more likely than not outcome. We adjust these unrecognized tax benefits, as well as the related interest, based on ongoing changes in facts and circumstances. Settlement of any particular position could require the use of cash. Favorable resolution for an amount less than the amount estimated by Barnwell would be recognized as a decrease in the effective income tax rate in the period of resolution, and unfavorable resolution in excess of the amount estimated by Barnwell would be recognized as an increase in the effective income tax rate in the period of resolution. In May 2014, the Canada Revenue Agency notified Barnwell that the examination of Barnwell’s Canadian federal income tax returns for fiscal 2010 and 2011 was completed with no adjustments. Below are the changes in unrecognized tax benefits.
|  | Year ended September 30,
|  | 2014 |  | 2013
Balance at beginning of year |  |  | $ | 704,000 |  |  |  | $ | 722,000 |
Accrued interest related to tax positions taken |  |  | 14,000 |  |  |  | 14,000 |
Translation adjustments |  |  | (58,000 | ) |  |  | (32,000 | )
Balance at end of year |  |  | $ | 660,000 |  |  |  | $ | 704,000 |
The total amount of unrecognized tax benefits at September 30, 2014 that, if recognized, would impact the effective tax rate was $660,000. Included in the liability for unrecognized tax benefits at September 30, 2014 and 2013, is accrued interest of $92,000 and $86,000, respectively. Uncertain tax positions consist of Canadian federal and provincial audit issues that involve transfer pricing adjustments. Because of a lack of clarity and uniformity regarding allowable transfer pricing valuations by differing jurisdictions, it is reasonably possible that the total amount of uncertain tax positions may significantly increase or decrease within the next 12 months, and the estimated range of any such variance is not currently estimable based upon facts and circumstances as of September 30, 2014. Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities at September 30, 2014:
Jurisdiction |  | Fiscal Years Open |
U.S. federal |  | 2011 – 2013 |
Various U.S. states |  | 2011 – 2013 |
Canada federal |  | 2005, 2007 – 2013 |
Various Canadian provinces |  | 2005, 2007 – 2013 |

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: 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 6: 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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