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INCOME TAXES | 12 Months Ended
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Sep. 30, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of earnings (loss) before income taxes, after adjusting the earnings (loss) for non-controlling interests, are as follows:
| Year ended September 30,
| 2016 |  | 2015
United States | $ | (360,000 | ) |  | $ | 1,011,000 |
Canada | (3,977,000 | ) |  | 1,460,000 |
| $ | (4,337,000 | ) |  | $ | 2,471,000 |
The components of the income tax provision (benefit) related to the above income (loss) are as follows:
| Year ended September 30,
| 2016 |  | 2015
Current (benefit) provision: |  |  |  |  |
United States – Federal | $ | — |  |  | $ | — |
United States – State | — |  |  | 94,000 |
| — |  |  | 94,000 |
Canadian | (651,000 | ) |  | 1,529,000 |
Total current | (651,000 | ) |  | 1,623,000 |
Deferred (benefit) provision: |  |  |  |  |
United States - Federal | — |  |  | (90,000 | )
United States - State | 220,000 |  |  | — |
Canadian | (291,000 | ) |  | (325,000 | )
Total deferred | (71,000 | ) |  | (415,000 | )
| $ | (722,000 | ) |  | $ | 1,208,000 |
During fiscal 2015, Barnwell determined that it was not more likely than not that all of our oil and natural gas deferred tax assets under Canadian tax law were realizable due to significant declines in oil and natural gas prices, which in turn restricted funds available for the oil and natural gas capital expenditures needed to replace production and abate declining reserves. As a result the Company recorded a valuation allowance for the portion of Canadian tax law deferred tax assets related to asset retirement obligations that may not be realizable. The change in the valuation allowance related to asset retirement obligations and Canadian branch tax loss carryforwards that may not be realizable included in the deferred income tax provision (benefit) for the years ended September 30, 2016 and 2015, was a charge of $292,000 and $1,028,000, respectively. On June 29, 2015, the Canadian province of Alberta enacted legislation that increased the provincial corporate tax rate from 10% to 12%, effective July 1, 2015, bringing the total Canadian statutory tax rate applicable to our business from 28.75% to 30.65%. The impact of the enactment, which was not significant, was recorded as a charge to income taxes during the year ended September 30, 2015. Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that the Company is taxed separately in Canada based on Canadian source operations and in the U.S. based on consolidated operations, Canadian income taxes are not estimated to have a future benefit as foreign tax credits or deductions for U.S. tax purposes, and U.S. consolidated net operating losses and other deferred tax assets under U.S. tax law are not estimated to have any future U.S. tax benefit. In addition, consolidated taxes include the aforementioned valuation allowance for a portion of deferred tax assets under Canadian tax law. A reconciliation between the reported income tax (benefit) provision and the amount computed by multiplying the earnings (loss) attributable to Barnwell before income taxes by the U.S. federal tax rate of 35% is as follows:
| Year ended September 30,
| 2016 |  | 2015
Tax (benefit) provision computed by applying statutory rate | $ | (1,518,000 | ) |  | $ | 865,000 |
Increase in the valuation allowance - U.S. federal and Canadian tax law | 1,051,000 |  |  | 1,653,000 |
Additional effect of the foreign tax provision on the total tax provision | (484,000 | ) |  | (1,243,000 | )
U.S. state deferred tax provision | 220,000 |  |  | — |
Other | 9,000 |  |  | (67,000 | )
| $ | (722,000 | ) |  | $ | 1,208,000 |
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,
| 2016 |  | 2015
Deferred income tax assets: |  |  |  |  |
U.S. tax effect of deferred Canadian taxes | $ | — |  |  | $ | 91,000 |
Foreign tax credit carryover | 4,028,000 |  |  | 4,661,000 |
Alternative minimum tax credit carryover | 460,000 |  |  | 460,000 |
U.S. federal net operating loss carryover | 8,728,000 |  |  | 4,440,000 |
Tax basis of investment in land and residential real estate in excess of book basis | 836,000 |  |  | 1,115,000 |
Property and equipment accumulated book depreciation and depletion in excess of tax under U.S. tax law | 3,611,000 |  |  | 4,494,000 |
Liabilities accrued for books but not for tax under U.S. tax law | 4,843,000 |  |  | 4,423,000 |
Liabilities accrued for books but not for tax under Canadian tax law | 2,303,000 |  |  | 2,149,000 |
Other | 1,108,000 |  |  | 746,000 |
Total gross deferred tax assets | 25,917,000 |  |  | 22,579,000 |
Less valuation allowance | (23,410,000 | ) |  | (21,387,000 | )
Net deferred income tax assets | 2,507,000 |  |  | 1,192,000 |
Deferred income tax liabilities: |  |  |  |  |
Property and equipment accumulated tax depreciation and depletion in excess of book under Canadian tax law | (1,012,000 | ) |  | (1,459,000 | )
Book basis of investment in land development partnerships in excess of tax basis | (1,668,000 | ) |  | — |
Other | (31,000 | ) |  | (4,000 | )
Total deferred income tax liabilities | (2,711,000 | ) |  | (1,463,000 | )
Net deferred income tax liability | $ | (204,000 | ) |  | $ | (271,000 | )
Net deferred income tax liability is included in the Consolidated Balance Sheets as follows:
| September 30,
| 2016 |  | 2015
Current deferred income tax asset |  |  |  |  |
(included in other current assets) | $ | — |  |  | $ | 178,000 |
Deferred income tax liability | (204,000 | ) |  | (449,000 | )
Net deferred income tax liability | $ | (204,000 | ) |  | $ | (271,000 | )
The total valuation allowance increased $2,023,000 for the year ended September 30, 2016. The increase was primarily due to an increase in the valuation allowance for deferred tax assets under U.S. federal tax law primarily related to an increase in U.S. federal net operating loss carryovers that are not more likely than not to have a future tax benefit and the aforementioned valuation allowance necessary for the portion of Canadian tax law deferred tax assets that may not be realizable. The increase was partially offset by a decrease in the valuation allowance due to changes in various other deferred tax assets for which a full valuation allowance had been provided. Of the total net increase in the valuation allowance for fiscal 2016, $1,344,000 was recognized as income tax expense and $679,000 was charged to accumulated other comprehensive loss. Net deferred tax assets at September 30, 2016 of $2,507,000 consists of the portion of deferred tax assets for which it is estimated that it is more likely than not that such future deductions will be realizable as the result of concurrent deferred tax liability reversals or tax loss carryback strategies under Canadian tax law. At September 30, 2016, Barnwell had foreign tax credit carryovers, alternative minimum tax credit carryovers, and U.S. federal net operating loss carryovers totaling $4,028,000, $460,000 and $25,671,000, respectively. All three items were fully offset by valuation allowances at September 30, 2016. The net operating loss carryovers expire in fiscal years 2032-2036, and the foreign tax credit carryovers expire in fiscal years 2019-2025. 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. Below are the changes in unrecognized tax benefits.
| Year ended September 30,
| 2016 |  | 2015
Balance at beginning of year | $ | 582,000 |  |  | $ | 660,000 |
Effect of tax positions taken in prior years | — |  |  | 92,000 |
Accrued interest related to tax positions taken | 20,000 |  |  | 38,000 |
Lapse of statute | (173,000 | ) |  | (174,000 | )
Translation adjustments | (52,000 | ) |  | (34,000 | )
Balance at end of year | $ | 377,000 |  |  | $ | 582,000 |
The total amount of unrecognized tax benefits at September 30, 2016 that, if recognized, would impact the effective tax rate was $377,000. Included in the liability for unrecognized tax benefits at September 30, 2016 and 2015, is accrued interest of $35,000 and $113,000, respectively. Uncertain tax positions consist primarily of Canadian federal and provincial 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, 2016. Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities at September 30, 2016:
Jurisdiction | Fiscal Years Open
U.S. federal | 2013 – 2015
Various U.S. states | 2013 – 2015
Canada federal | 2009 – 2015
Various Canadian provinces | 2009 – 2015

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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 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 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 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=65882285&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=65882285&loc=d3e32537-109319 + Details
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