Income Taxes

6 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income Tax Expense

Our interim effective tax rates reflect the estimated annual effective tax rates for the fiscal years ended September 30, 2022 and 2021, adjusted for tax expense associated with certain discrete items. The effective tax rates for the three months ended March 31, 2022 and 2021 was 10.1% and 17.2% and for the six months ended March 31, 2022 and 2021 were 8.3% and 19.8%. These effective tax rates differ from the federal statutory tax rate of 21% primarily due to the amortization of excess deferred federal income tax liabilities, tax credits, state income taxes and other permanent book-to-tax differences. These adjustments have a relative impact on the effective tax rate proportionally to pretax income or loss.

Beginning in the second quarter of fiscal 2021 and through the end of the fiscal year, we reached agreement with regulators in various states to begin refunding excess deferred tax liabilities generally over a three to five year period. This increased the refund of excess deferred tax liabilities to customers in the current year period and significantly reduced the effective tax rate for the three and six month periods ended March 31, 2022 compared to the prior year periods.

Regulatory Excess Deferred Taxes

Regulatory excess net deferred taxes represent changes in our net deferred tax liability related to our cost of service ratemaking due to the enactment of the Tax Cuts and Jobs Act of 2017 (the "TCJA") and state tax legislative changes in Kansas and Louisiana. Currently, the regulatory excess net deferred tax liability of $578.5 million is being returned over various periods. Of this amount, $458.3 million is being returned to customers over 35 - 60 months. An additional $105.1 million is being returned to customers on a provisional basis over 15 - 69 years until our regulators establish the final refund periods. The refund of the remaining $15.1 million will be addressed in future rate proceedings.

As of March 31, 2022 and September 30, 2021, $156.0 million and $155.9 million is recorded in other current liabilities.

Winter Storm Uri Deferred Tax Assets and Liabilities

We deduct our purchased gas costs for federal income tax purposes in the period they are paid. As a result of impacts from Winter Storm Uri, we recorded a $471.0 million (tax effected) increase in our deferred tax liability and an increase in our net operating loss carryforward as of September 30, 2021. At September 30, 2021, we had $850.2 million (tax effected) of federal net operating loss carryforwards.

As a result of the Financing Order issued by the Texas RRC on February 8, 2022, we reduced the deferred tax liability associated with the Winter Storm Uri regulatory asset and the corresponding deferred tax asset associated with net operating loss carryforwards by $451.1 million during the second quarter of fiscal 2022.

As of March 31, 2022, we had $438.0 million (tax effected) of federal net operating loss carryforwards. The federal net operating loss carryforwards are available to offset future taxable income. These net operating losses can be carried forward indefinitely. The Company also has $31.1 million (tax effected) of state net operating loss carryforwards (net of $8.2 million of federal effects) and $1.7 million of state tax credits carryforwards (net of $0.5 million of federal effects). Depending on the jurisdiction in which the state net operating loss was generated, the carryforwards are subject to expiration as early as 2035.