Note 9 - Income Taxes

9 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9

- Income Taxes

      The

December 2017

Tax Cuts and Jobs Act (“Tax Act”) reduced the maximum corporate income tax rate from

35%

to

21%,

effective

January 1, 2018. 

The Company has completed its review of the Tax Act.  The impact to its financial statements is as follows:  (i) current income tax expense or benefit is calculated using a blended rate of

24.28%

pursuant to IRC Section

15,

(ii) deferred tax expense includes a discrete net tax benefit of approximately

$16

million resulting from a revaluation of deferred tax assets and liabilities to the expected tax rate that will be applied when temporary differences are expected to reverse, (iii) items that are expected to reverse during fiscal

2018

are valued at the blended rate of

24.28%

while temporary differences that will reverse after fiscal

2018

are valued at the

21%

rate, and (iv) approximately

$20

million of the revaluation of deferred taxes relates to items that were initially recorded as accumulated other comprehensive income (“AOCI”).  This revaluation of approximately

$20

million was recorded as a component of income tax expense or benefit in continuing operations. 

For the

nine

months ended

June 30, 2018,

the Company recorded an income tax benefit of

$17,660,000

on pretax loss of

$4,125,000.

  The income tax benefit was the result of applying the effective tax rate anticipated for fiscal

2018

to pretax loss for the

nine

-month period ended

June 30, 2018.  

The effective tax rate (before the discrete Tax Act item discussed above) was greater than the statutory rate primarily due to the dividends received deduction which increases the loss for tax purposes. 

During the prior fiscal year, on pretax loss of

$5,858,000

for the

nine

months ended

June 30, 2017,

the Company recorded an income tax benefit of

$6,015,000

which was the net result of applying the effective tax rate anticipated for fiscal

2017

to pretax loss for the

nine

months ended

June 30, 2017

and included a reversal of an accrued liability of approximately

$2,665,000

for uncertain and unrecognized tax benefits relating to an acquisition in fiscal

2013.

  The Internal Revenue Service concluded its examination of the Company’s fiscal

2014

income tax return with

no

proposed changes to the tax position that gave rise to this liability.  As a result, this liability was reversed along with the related accrued interest and penalty expense of

$743,000.

  In addition, a deferred tax liability, in the amount of

$352,000,

relating to temporary differences that would only exist if the uncertain tax position was never recognized, was reversed. The effective tax rate (before the discrete IRS item) was greater than the statutory rate mainly resulting from the dividends received deduction. 

The Company’s effective tax rate was

428%

and

103%

for the

nine

months ended

June 30, 2018

and

2017,

respectively.

      The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is

no

longer subject to examinations for fiscal years before fiscal

2015

with regard to federal income taxes and fiscal

2013

for state income taxes.