Note 8 - Income Taxes

9 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

8

- Income Taxes

For the

nine

months ended

June 30, 2019,

the Company recorded an income tax benefit of

$4,980,000

on a pretax loss of

$17,672,000.

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

2019

to the pretax loss for the

nine

months ended

June 30, 2019.  

The effective tax rate was greater than the statutory rate primarily due to the dividends received deduction and state tax benefits. 

During the prior fiscal year, the

December 2017

Tax Cuts and Jobs Act reduced the maximum corporate income tax rate from

35%

to

21%.

  The impact to the Company’s financial statements was as follows:  (i) fiscal

2018

income tax expense or benefit was calculated using a blended rate of

24.28%

pursuant to IRC Section

15,

(ii) deferred tax expense included 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 were expected to reverse during fiscal

2018

were valued at the blended rate of

24.28%

while temporary differences that will reverse after fiscal

2018

were valued at the

21%

rate, and (iv) approximately

$20

million of the revaluation of deferred taxes related to items that were initially recorded as accumulated other comprehensive income. This revaluation of approximately

$20

million was recorded as a component of income tax expense or benefit in continuing operations.  Consequently, on a pretax loss of

$4,125,000

for the

nine

months ended

June 30, 2018,

the Company recorded an income tax benefit of

$17,660,000.

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

2018

to the pretax loss for the

nine

-month period ended

June 30, 2018.  

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

The Company’s effective tax rate was

28%

for the

nine

months ended

June 30, 2019

as compared with

428%

in the prior year period. The difference in the effective tax rate was primarily due to the effect of the tax cuts in the prior year period as discussed above.

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

2014

for state income taxes.