Income Taxes

12 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We are the sole managing member of RMR LLC. We are a corporation subject to U.S. federal and state income tax with respect to our allocable share of any taxable income of RMR LLC and its tax consolidated subsidiaries. RMR LLC is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RMR LLC is generally not subject to U.S. federal and most state income taxes. Any taxable income or loss generated by RMR LLC is passed through to and included in the taxable income or loss of its members, including RMR Inc. and ABP Trust, based on each member’s respective ownership percentage.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. The Tax Act significantly revised the U.S. corporate income tax system, by among other things, lowering corporate income tax rates. Since we have a September 30 fiscal year end, the lower corporate income tax rate of 21.0% was phased in, resulting in a federal statutory tax rate of approximately 24.5% for our fiscal year ending September 30, 2018. The Tax Act reduction in corporate income tax rate also caused us to adjust our deferred tax asset to the lower federal base rates, resulting in an increase in income tax expense of $19,817 for the year ending September 30, 2018.

We had income (loss) before income taxes as follows:

	Fiscal Year Ended September 30,
	2020		2019		2018
United States	$	77,885	$	196,364	$	276,340
Foreign	—		—		(52)
Total	$	77,885	$	196,364	$	276,288

We had a provision for income taxes which consists of the following:

	Fiscal Year Ended September 30,
	2020		2019		2018
Current:
Federal	$	7,138	$	20,020	$	29,644
State	2,584		7,302		9,403
Deferred:
Federal	1,252		(28)		15,043
State	578		26		4,772
Total	$	11,552	$	27,320	$	58,862

A reconciliation of the statutory income tax rate to the effective tax rate is as follows:

	Fiscal Year Ended September 30,
	2020		2019		2018
Income taxes computed at the federal statutory rate	21.0	%	21.0	%	24.5	%
State taxes, net of federal benefit	2.9	%	2.9	%	2.6	%
Tax Act transitional impact (1)	—	%	—	%	7.2	%
Permanent items (2)	1.0	%	0.1	%	(2.2)	%
Net income attributable to noncontrolling interest	(10.1)	%	(10.1)	%	(10.8)	%
Total	14.8	%	13.9	%	21.3	%

(1)    Transitional impact for the year ending September 30, 2018 is the $19,817 adjustment to our deferred tax asset due to the reduction in our corporate income tax rate under the Tax Act.

(2)    Permanent items for the year ending September 30, 2018 include the $24,710 reduction in our liability related to the tax receivable agreement, dated June 5, 2015, by and among RMR Inc., RMR LLC and ABP Trust, or the Tax Receivable Agreement, discussed in Note 6, Related Person Transactions.

The components of the deferred tax assets as of September 30, 2020 and 2019 are entirely comprised of the outside basis difference in our partnership interest in RMR LLC.

ASC 740, Income Taxes, provides a model for how a company should recognize, measure and present in its financial statements uncertain tax positions that have been taken or are expected to be taken with respect to all open years and in all significant jurisdictions. Pursuant to this topic, we recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50.0% likely to be realized upon settlement. As of September 30, 2020, 2019 and 2018, we had no uncertain tax positions.