INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2015

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, 2015, 2014 and 2013 is as follows:



(Thousands)	2015			2014			2013
Statutory income tax expense	$	84,239		$	67,834		$	52,661
Change resulting from
State income taxes	8,233			7,785			5,168
Depreciation and cost of removal	(5,149		)	(4,437		)	(5,769		)
Investment/production tax credits	(30,096		)	(23,083		)	(18,749		)
Basis adjustment of solar assets due to ITC	4,861			3,959			3,225
Other	(2,364		)	(218		)	(961		)
Income tax provision	$	59,724		$	51,840		$	35,575
Effective income tax rate	24.8		%	26.8		%	23.6		%

Schedule of Components of Income Tax Provision (Benefit)

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



(Thousands)	2015			2014			2013
Current
Federal	$	20,492		$	37,904		$	12,248
State	5,473			11,096			1,763
Deferred
Federal	56,480			24,963			34,127
State	7,375			960			6,186
Investment/production tax credits	(30,096		)	(23,083		)	(18,749		)
Income tax provision	$	59,724		$	51,840		$	35,575

Schedule of Deferred Tax Assets and Liabilities

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



(Thousands)	2015			2014
Deferred tax assets
Investment tax credits ⁽¹⁾	$	24,770		$	10,341
Deferred service contract revenue	3,440			3,299
Incentive compensation	10,369			14,632
Fair value of derivatives	—			14,350
State net operating losses	12,757			8,962
Conservation incentive plan	2,091			2,312
Underrecovered gas costs	2,827			—
Other	12,762			10,078
Total deferred tax assets	$	69,016		$	63,974
Deferred tax liabilities
Property related items	$	(440,420	)	$	(371,017	)
Remediation costs	(7,641		)	(12,429		)
Equity investments	(37,930		)	(35,474		)
Post employment benefits	(2,976		)	(10,268		)
Fair value of derivatives	(3,180		)	—
Under-recovered gas costs	—			(5,056		)
Other	(13,409		)	(11,751		)
Total deferred tax liabilities	$	(505,556	)	$	(445,995	)

Total net deferred tax liabilities	$	(436,540	)	$	(382,021	)

(1) Includes $2.7 million and $2.8 million for NJNG for fiscal 2015 and fiscal 2014, respectively, which is being amortized over the life of the related assets and $22.1 million and $7.5 million for NJRCEV for fiscal 2015 and fiscal 2014, respectively, which is ITC carryforward.

Schedule of Deferred Tax assets Expiration

The deferred tax assets will expire as follows:



(Thousands)
Fiscal years 2016 - 2019	$	—
Fiscal years 2020 - 2024	—
Fiscal years 2025 - 2029	43
Fiscal years 2030 - 2035	34,814
Total	$	34,857