INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2014

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the U.S. federal statutory rate of 35 percent to the effective rate from operations for the fiscal years ended September 30, 2014, 2013 and 2012 is as follows:



(Thousands)	2014			2013			2012
Statutory income tax expense	$	67,834		$	52,661		$	35,213
Change resulting from
State income taxes	7,785			5,168			5,434
Depreciation and cost of removal	(4,437		)	(5,769		)	(3,999		)
Investment tax credits	(23,083		)	(18,749		)	(34,397		)
Basis adjustment of solar assets due to ITC	3,959			3,225			5,974
Other	(218		)	(961		)	(496		)
Income tax provision	$	51,840		$	35,575		$	7,729
Effective income tax rate	26.8		%	23.6		%	7.7		%

Schedule of Components of Income Tax Expense (Benefit)

The income tax provision (benefit) from operations consists of the following:



(Thousands)	2014			2013			2012
Current
Federal	$	37,904		$	12,248		$	14,983
State	11,096			1,763			4,025
Deferred
Federal	24,963			34,127			18,757
State	960			6,186			4,361
Investment tax credits	(23,083		)	(18,749		)	(34,397		)
Income tax provision	$	51,840		$	35,575		$	7,729

Schedule of Deferred Tax Assets and Liabilities

The temporary differences, which give rise to deferred tax assets and (liabilities), consist of the following:



(Thousands)	2014				2013
Deferred tax assets
Investment tax credits	$	10,341		⁽¹⁾	$	43,033
Deferred service contract revenue	3,299				3,231
Incentive compensation	14,632				6,798
Fair value of derivatives	14,350				—
State net operating losses	8,962				6,118
Conservation incentive plan	2,312				—
Other	10,078				5,718
Total deferred tax assets	$	63,974			$	64,898
Deferred tax liabilities
Property related items	$	(371,017	)		$	(329,921	)
Remediation costs	(12,429		)		(18,881		)
Equity investments	(35,474		)		(33,368		)
Post employment benefits	(10,268		)		(17,455		)
Fair value of derivatives	—				(6,258		)
Conservation incentive plan	—				(7,611		)
Under-recovered gas costs	(5,056		)		(383		)
Other	(11,751		)		(13,699		)
Total deferred tax liabilities	$	(445,995	)		$	(427,576	)

Total net deferred tax liabilities	$	(382,021	)		$	(362,678	)

(1) Includes $2.8 million for NJNG, which is being amortized over the life of the related assets and $7.5 million for NJRCEV, which is ITC carryforward.

Summary of Operating Loss Carryforwards

The deferred tax assets will expire as follows:



(Thousands)
Fiscal years 2015 - 2018	$	78
Fiscal years 2019 - 2023	—
Fiscal Years 2024 - 2028	—
Fiscal Years 2029 - 2034	8,946
Total	$	9,024