Income Taxes

9 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

REP LLC was organized as a limited liability company and treated as a flow-through entity for federal income tax purposes. As such, taxable income and any related tax credits were passed through to its members and are included in their tax returns, even though such taxable income or tax credits may not have been distributed. In connection with the closing of the Merger, the Company’s tax status changed from a limited liability company to a C-corporation. As a result, the Company is responsible for Federal and State income taxes and must record deferred tax assets and liabilities for the tax effects of any temporary differences that exist on the date of the change. See further discussion in Note 4 - Acquisitions and Divestitures. When push down accounting does not apply as part of a business combination, GAAP requires the effect of the change in tax status to be recognized in the financial statements and the effect is included in income (loss) from continuing operations. Accordingly, a provision for federal and state corporate income taxes has been made only for the operations of REP LLC from February 27, 2021 through March 31, 2021 in the accompanying consolidated financial statements. Upon consummation of the Merger, the Company established a $13.6 million provision for deferred income taxes with the conversion to a C-corporation.

The components of the Company's consolidated provision for income taxes from continuing operations are as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Current income tax expense:
Federal	$	(780)	$	—	$	—	$	—
State	(229)		—		(232)		—
Total current income tax expense	$	(1,009)	$	—	$	(232)	$	—
Deferred income tax expense:
Federal	$	6,629	$	—	$	20,629	$	—
State	(2,375)		319		(3,444)		319
Total deferred income tax expense	4,254		319		17,185		319
Total income tax expense	$	3,245	$	319	$	16,953	$	319

A reconciliation of the statutory federal income tax rate to the Company's effective income tax rate is as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Tax at statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
Nondeductible compensation	(21.8)	%	—	%	(8.5)	%	—	%
Transaction costs	(32.6)	%	—	%	(12.8)	%	—	%
Other	(0.1)	%	—	%	(0.1)	%	—	%
State income taxes, net of federal benefit	14.9	%	—	%	5.8	%	—	%
Change in Tax Status	—	%	—	%	(30.5)	%	—	%
Income Subject to Taxation by REP LLC's Unitholders	(0.2)	%	(21.0)	%	(12.9)	%	(21.0)	%
Effective income tax rate	(18.8)	%	—	%	(38.0)	%	—	%

The Company's federal income tax returns for the years subsequent to September 30, 2017 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to September 30, 2017. The Company currently believes that all other significant filing positions are highly certain and that all of its other significant income tax positions and deductions would be sustained under audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions.

Section 382 of the Internal Revenue Code limits the utilization of U.S. net operating loss ("NOL") carryforwards following a change in control. The Merger caused a stock ownership change for purposes of Section 382. Subject to an approximate annual limit, the Company has federal net operating losses of $10.2 million of which $4.7 million will expire beginning in 2022 with $5.5 million of the NOL's do not expire. We believe it is more likely than not the tax benefit of these net operating losses will be fully realized, as such no valuation allowance has been recorded. The deferred tax assets for the net operating losses are presented net with deferred tax liabilities, which primarily consist of book and tax depreciation differences.