Income Taxes

6 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rates for the quarters ended March 31, 2020 and March 31, 2019 were negative 53.2% and positive 24.7%, respectively. The change in the effective tax rate was primarily the result of recording a valuation allowance against certain deferred tax assets, discussed below. The effective tax rates for the six months ended March 31, 2020 and March 31, 2019 were 139.9% and 21.4%, respectively. The increase in the tax rate is a result of the deferred tax valuation allowance, differences

between the book and tax treatment of stock compensation, as well as the elimination of the Enhanced Oil Recovery tax credit in fiscal 2020.

A valuation allowance for deferred tax assets, including net operating losses, is recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. For the quarter ended March 31, 2020, the Company recorded a full valuation allowance against certain state deferred tax assets in the amount of $56.8 million based on its conclusion, considering all available evidence (both positive and negative), that it was more likely than not that the deferred tax assets would not be realized. A significant item of objective negative evidence considered was a projected three-year cumulative pre-tax loss primarily due to non-cash impairments of proved natural gas and oil properties due to declining commodity prices. Changes in judgment regarding future realization of these deferred tax assets may result in a reversal of all or a portion of the valuation allowance. The Company will continue to re-assess this position each quarter.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The CARES Act, among other things, includes provisions relating to alternative minimum tax (AMT) credit refunds, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, and modifications to the net interest deduction limitation. The Company has filed for the acceleration of the remaining AMT credit refunds (under CARES) of $42.5 million, which has been recorded as a current receivable as of March 31, 2020. In addition, the Company is pursuing certain payroll tax related provisions included in the CARES Act.

Prior to the CARES Act, the 2017 Tax Reform Act repealed the corporate alternative minimum tax and provided that the Company’s existing AMT credit carryovers were refundable, if not utilized to reduce tax, beginning in fiscal 2019. As of September 30, 2018, the Company had $85.0 million of AMT credit carryovers that were expected to be refunded between fiscal 2020 and fiscal 2023, if not previously utilized. The Company received the first installment for $42.5 million of AMT credit refunds related to fiscal 2019 in January 2020.