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INCOME TAXES
 12 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income taxes have been based on the following components of Income before taxes from continuing operations:
 For the Years Ended September 30,
 202220212020
Domestic$(247,004)$55,835 $27,306 
Non-U.S.(23,875)54,120 40,175 
 $(270,879)$109,955 $67,481 
Provision (benefit) for income taxes on income was comprised of the following from continuing operations:
 For the Years Ended September 30,
 202220212020
Current$73,542 $25,890 $23,915 
Deferred(56,706)13,763 2,122 
Total$16,836 $39,653 $26,037 
U.S. Federal$(5,178)$14,305 $7,691 
State and local14,361 7,117 7,204 
Non-U.S.7,653 18,231 11,142 
Total provision$16,836 $39,653 $26,037 

Differences between the effective income tax rate applied to Income (loss) before taxes from continuing operations and the U.S. Federal statutory income tax rate are presented in the table below. For the fiscal year ended September 30, 2022, the Company reported a pre-tax loss and income tax expense. As a result, unfavorable items to the US Federal statutory income tax rate are presented as negative amounts, while favorable items are presented as positive amounts.
 For the Years Ended September 30,
 202220212020
U.S. Federal statutory income tax rate21.0 %21.0 %21.0 %
State and local taxes, net of Federal benefit(5.3)%4.8 %7.9 %
Non-U.S. taxes - foreign permanent items and taxes(1.5)%3.1 %4.2 %
Change in tax contingency reserves(0.1)%0.2 %0.2 %
Impact of foreign rate change on deferred tax balances— %2.8 %— %
Tax Reform-Repatriation of Foreign Earnings and GILTI0.2 %0.4 %0.3 %
Change in valuation allowance(1.7)%0.4 %(2.6)%
Other non-deductible/non-taxable items, net(0.4)%0.4 %1.4 %
Non-deductible officer's compensation(1.9)%4.0 %5.5 %
Research and U.S. foreign tax credits0.2 %(0.1)%1.4 %
Goodwill impairment(17.1)%— %— %
Share based compensation0.4 %(2.0)%— %
Other— %1.1 %(0.7)%
Effective tax rate(6.2)%36.1 %38.6 %
The tax effect of temporary differences that give rise to future deferred tax assets and liabilities are as follows:
 At September 30,
 20222021
Deferred tax assets:  
Bad debt reserves$2,873 $2,066 
Inventory reserves5,005 11,298 
Deferred compensation (equity compensation and defined benefit plans)8,658 10,598 
Compensation benefits4,859 5,269 
Insurance reserve2,660 2,183 
Warranty reserve3,402 3,761 
Lease liabilities49,649 39,378 
Net operating loss20,528 10,706 
Tax credits5,933 7,198 
Capital loss carryback— 2,533 
Other reserves and accruals5,553 7,474 
 109,120 102,464 
Valuation allowance(13,490)(10,425)
Total deferred tax assets95,630 92,039 
Deferred tax liabilities:  
Goodwill and intangibles(25,484)(46,585)
Property, plant and equipment(158,074)(53,817)
Right-of-use assets(47,949)(38,511)
Other(1,224)(1,232)
Total deferred tax liabilities(232,731)(140,145)
Net deferred tax liabilities$(137,101)$(48,106)

The components of the net deferred tax liability, by balance sheet account, were as follows:
 At September 30,
 20222021
Other assets$339 $323 
Other liabilities(139,417)(49,289)
Liabilities of discontinued operations1,977 860 
Net deferred liability$(137,101)$(48,106)

In 2022, the net increase in the valuation allowance of $3,065 is the result of a determination that certain state and foreign net operating losses will not be realized, partially offset by tax rate changes impacting the value of the deferred tax assets and the reversal of a valuation allowance related to certain state credits for the Telephonics business, which was sold on June 27, 2022 . In 2021, the increase in the valuation allowance of $601 is primarily the result of foreign net operating losses and generation of state tax credits which will not be recognized, partially offset by the expiration of foreign tax credits during the year.

At both September 30, 2022 and 2021, Griffon has a policy election to indefinitely reinvest the undistributed earnings of foreign subsidiaries with operations outside the U.S. As of September 30, 2022, we have approximately $178,233 of unremitted earnings of non-U.S. subsidiaries. The Company generates substantial cash flow in the U.S. and does not have a current need for the cash to be returned to the U.S. from the foreign entities. The Company continues to reinvest the undistributed earnings of its foreign subsidiaries and may be subject to additional foreign withholding taxes and U.S. state income taxes if it reverses its indefinite reinvestment assertion in the future. Outside basis differences were impractical to account for at this time and are currently considered as being permanent in duration.
At September 30, 2022, Griffon had $44,521 loss carryforwards for U.S. tax purposes and $8,798 for non-U.S. tax purposes. At September 30, 2021, Griffon had no loss carryforwards for U.S. tax purposes and $8,332 for non-U.S. tax purposes. The U.S loss carryforwards can be carried forward indefinitely but are subject to certain limitations on annual usage. The non-U.S. loss carryforwards expire in varying amounts beginning in 2027 to indefinite carryforward.

At September 30, 2022 and 2021, Griffon had state and local loss carryforwards of $192,134 and $139,894, respectively, which expire in varying amounts through 2041.

At September 30, 2022 and 2021, Griffon had federal tax credit carryforwards of $5,933 and $5,933, respectively, which expire in varying amounts through 2035.

At September 30, 2022 and 2021, Griffon had capital loss carryovers for U.S. tax purposes of $0 and $10,327, respectively, which expire in varying amounts through 2026. The losses were generated in September 30, 2021 and September 30, 2019 tax years. The carryovers are available for three-year carryback or five-year carryforward periods.

We believe it is more likely than not that the benefit from certain federal and state tax attributes will not be realized. In recognition of this risk, we have provided a valuation allowance as of September 30, 2022 and 2021 of $13,490 and $10,425, respectively, on the deferred tax assets. As it becomes probable that the benefits of these attributes will be realized, the reversal of valuation allowance will be recognized as a reduction of income tax expense.
If certain substantial changes in Griffon's ownership occur, there would be an annual limitation on the amount of carryforward(s) that can be utilized.

Griffon files U.S. Federal, state and local tax returns, as well as applicable returns in Canada, Australia, U.K. and other non-U.S. jurisdictions. Griffon’s U.S. Federal income tax returns are no longer subject to income tax examination for years before 2017. Griffon's major U.S. state and other non-U.S. jurisdictions are no longer subject to income tax examinations for years before 2014. Various U.S. state and statutory tax audits are currently underway.

The following is a roll forward of unrecognized tax benefits:
Balance at September 30, 2020$4,180 
Additions based on tax positions related to the current year180 
Additions based on tax positions related to prior years24 
Lapse of Statutes(7)
Balance at September 30, 2021$4,377 
Additions based on tax positions related to the current year172 
Additions based on tax positions related to prior years(1)
2,298 
Lapse of Statutes(39)
Settlements— 
Balance at September 30, 2022$6,808 
(1) Relates to unrecognized tax benefits assumed with the acquisition of Hunter.


If recognized, the amount of potential unrecognized tax benefits that would impact Griffon’s effective tax rate is $3,536. Griffon recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At September 30, 2022 and 2021, the combined amount of accrued interest and penalties related to tax positions taken or to be taken on Griffon’s tax returns and recorded as part of the reserves for uncertain tax positions was $521 and $100, respectively. Griffon cannot reasonably estimate the extent to which existing liabilities for uncertain tax positions may increase or decrease within the next twelve months as a result of the progression of ongoing tax audits or other events. Griffon believes that it has adequately provided for all open tax years by tax jurisdiction.
On August 16, 2022, the U.S. Government enacted the Inflation Reduction Act ("IRA") into law. Included in the IRA was a provision to implement a 15% corporate alternative minimum tax on “adjusted financial statement income” for applicable corporations and a 1% excise tax on repurchases of stock. These provisions are effective for tax years beginning after December 31, 2022. We are in the process of evaluating the provisions of the IRA.