XML 35 R22.htm IDEA: XBRL DOCUMENT v3.5.0.2
Income Taxes (Notes)
9 Months Ended
Jun. 30, 2016
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes
In determining the quarterly provision for income taxes, management uses an estimated annual effective tax rate which is based on the expected annual income and statutory tax rates in the various jurisdictions in which it operates. The Company’s effective tax rate differs from the U.S. statutory rate primarily due to state and local taxes, and differing statutory tax rates applied to the income of non-U.S. subsidiaries. The Company records the tax effect of certain discrete items, including the effects of changes in tax laws, tax rates and adjustments with respect to valuation allowances or other unusual or nonrecurring tax adjustments, in the interim period in which they occur, as an addition to, or reduction from, the income tax provision, rather than being included in the estimated effective annual income tax rate. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective income tax rate.
The Company is required to assess its deferred tax assets and the need for a valuation allowance at each reporting period. This assessment requires judgment on the part of management with respect to benefits that may be realized. The Company will record a valuation allowance against deferred tax assets when it is considered more likely than not that all or a portion of the deferred tax assets will not be realized.
The valuation allowance for deferred tax assets as of June 30, 2016 and September 30, 2015 was $3.4 million and $3.2 million, respectively. The net change in the total valuation allowance for the three months ended June 30, 2016 was an increase of $0.2 million. The valuation allowances as of June 30, 2016 and September 30, 2015 were primarily related to U.S. state and local and foreign net operating loss carryforwards that, in the judgment of management, are not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company incurred U.S. federal, state, and local taxable income (losses) for the fiscal years ended September 30, 2015, 2014, and 2013 of $16.5 million, $(18.4) million, and $(24.5) million, respectively. There are no significant differences between actual levels of past taxable income and the results of operations, before income taxes in these jurisdictions. When evaluating if U.S. federal, state, and local deferred tax assets are realizable, the Company considered deferred tax liabilities of $2.4 million that are scheduled to reverse from 2016 to 2019 and $1.0 million of deferred tax liabilities associated with unrealized gains in securities which the Company could sell, if necessary. Furthermore, the Company considered its ability to implement business and tax planning strategies that would allow the remaining U.S. federal, state, and local deferred tax assets, net of valuation allowances, to be realized within approximately 11 years. Based on the tax planning strategies that are prudent and feasible, management believes that it is more likely than not that the Company will realize the tax benefit of the deferred tax assets, net of the existing valuation allowance, in the future. However, the realization of deferred income taxes is dependent on future events, and changes in estimate in future periods could result in adjustments to the valuation allowance.
Income tax expense of $6.8 million and $5.0 million for the nine months ended June 30, 2016 and 2015 and income tax expense of $15.6 million and $14.3 million for the nine months ended June 30, 2016 and 2015, respectively, reflect estimated federal, foreign and state taxes.
For the three months ended June 30, 2016 and 2015, the Company’s effective tax rate was 32% and29%, respectively. For the nine months ended June 30, 2016 and 2015, the Company’s effective tax rate was 29%. The effective tax rate during both periods, after consideration for discrete items, was lower than the U.S. federal statutory rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions. 
The Company and its subsidiaries file income tax returns with the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company has open tax years ranging from September 30, 2008 through September 30, 2015 with U.S. federal and state and local taxing authorities. In the U.K., the Company has open tax years ending September 30, 2014 to September 30, 2015. In Brazil, the Company has open tax years ranging from December 31, 2010 through December 31, 2015. In Argentina, the Company has open tax years ranging from September 30, 2010 to September 30, 2015. The Company’s U.S. net operating loss carry back claim has been reviewed by the Joint Committee of Taxation. The Company expects to receive a full refund.