INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2016

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, 2016, 2015 and 2014 is as follows:



(Thousands)	2016			2015			2014
Statutory income tax expense	$	54,321		$	84,239		$	67,834
Change resulting from:
State income taxes	6,044			8,233			7,785
Cost of removal of assets placed in service prior to1981	(5,738		)	(5,149		)	(4,437		)
Investment/production tax credits	(32,491		)	(30,096		)	(23,083		)
Basis adjustment of solar assets due to ITC	4,453			4,861			3,959
Other	(3,059		)	(2,364		)	(218		)
Income tax provision	$	23,530		$	59,724		$	51,840
Effective income tax rate	15.2		%	24.8		%	26.8		%

Schedule of Components of Income Tax Provision (Benefit)

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



(Thousands)	2016			2015			2014
Current:
Federal	$	(23,597	)	$	20,492		$	37,904
State	(2,209		)	5,473			11,096
Deferred:
Federal	70,386			56,480			24,963
State	11,441			7,375			960
Investment/production tax credits	(32,491		)	(30,096		)	(23,083		)
Income tax provision	$	23,530		$	59,724		$	51,840

Schedule of Deferred Tax Assets and Liabilities

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



(Thousands)	2016			2015
Deferred tax assets
Investment tax credits ⁽¹⁾	$	76,517		$	24,770
Deferred service contract revenue	3,601			3,440
Incentive compensation	8,128			10,369
Fair value of derivatives	1,179			—
Federal net operating losses	27,541			—
State net operating losses	18,113			12,757
Conservation incentive plan	—			2,091
Underrecovered gas costs	3,831			2,827
Other	11,668			12,762
Total deferred tax assets	$	150,578		$	69,016
Deferred tax liabilities
Property related items	$	(532,027	)	$	(440,420	)
Remediation costs	(7,928		)	(7,641		)
Equity investments	(37,740		)	(37,930		)
Postemployment benefits	(7,902		)	(2,976		)
Fair value of derivatives	—			(3,180		)
Conservation incentive plan	(14,953		)	—
Other	(14,610		)	(13,409		)
Total deferred tax liabilities	$	(615,160	)	$	(505,556	)
Total net deferred tax liabilities	$	(464,582	)	$	(436,540	)


(1)	Includes $2.5 million and $2.7 million for NJNG for fiscal 2016 and fiscal 2015, respectively, which is being amortized over the life of the related assets, and $74 million and $22.1 million for NJRCEV for fiscal 2016 and fiscal 2015, respectively, which is ITC carryforward.

Schedule of Deferred Tax assets Expiration

The deferred tax assets will expire as follows:



(Thousands)
Fiscal years 2017 - 2021	$	—
Fiscal years 2022 - 2026	—
Fiscal years 2027 - 2031	835
Fiscal years 2032 - 2036	118,849
Total	$	119,684