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Income Taxes
3 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company's effective tax rate from continuing operations was 21% for the three months ended December 31, 2018. The Company's effective tax rate from continuing operations was 121% for the three months ended December 31, 2017, which included nondeductible transactions costs related to the Merger, the impairment of nondeductible goodwill related to the Company's oil and gas operations, and other adjustments to the Company's valuation allowance as a result of the generation and utilization of its deferred tax assets. The Company's effective tax rate for both periods includes the effect of state income taxes, nondeductible items and benefits from noncontrolling interests.
The Tax Act, which was enacted on December 22, 2017, reduced the federal corporate tax rate from 35% to 21% for all corporations effective January 1, 2018. ASC 740 requires companies to reflect the effects of a tax law change in the period in which the law is enacted. Accordingly, the Company remeasured its deferred tax assets and liabilities along with the corresponding valuation allowance as of the 2017 enactment date. This remeasurement resulted in no additional tax expense or benefit except for the release of a portion of the valuation allowance for AMT credits which became refundable as a result of the tax law change. No other tax law changes as a result of the Tax Act had a significant impact on the Company’s financial statements.
At December 31, 2018 and September 30, 2018, deferred tax assets, net of deferred tax liabilities, were $28.5 million and $30.3 million, offset by a valuation allowance of $3.0 million and $3.4 million for the portion of the deferred tax assets that the Company has determined is more likely than not to be unrealizable. The valuation allowance was recorded because it is more likely than not that a portion of the Company's state deferred tax assets, primarily net operating loss (NOL) carryforwards, will not be realized because the Company is no longer operating in some states or the NOL carryforward periods are too brief to realize the related deferred tax asset. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on its deferred tax assets. Any reversal of the valuation allowance in future periods will impact the effective tax rate.
On October 5, 2017, D.R. Horton acquired 75% of the Company's common stock resulting in an ownership change under Section 382 of the Internal Revenue Code. Section 382 limits the Company's ability to use certain tax attributes and built-in losses and deductions in a given year. Any tax attributes or built-in losses and deductions that were limited in 2017 or are limited in 2018 are expected to be fully utilized in future years with the exception of some state NOL carryforwards.
The Company's unrecognized tax benefits totaled $1.1 million at December 31, 2018, all of which would affect its effective tax rate, if recognized.