Income Taxes (Tables)

12 Months Ended

Sep. 30, 2018

Components of income tax expense (benefit)

The components of the Company’s income tax expense are as follows:



	Year Ended September 30,
	2018		2017		2016
	(In millions)
Current tax expense:
Federal	$	373.2	$	425.6	$	376.0
State	53.6		27.3		15.9
	426.8		452.9		391.9
Deferred tax expense:
Federal	158.7		87.9		47.6
State	12.2		22.9		27.7
	170.9		110.8		75.3
Total income tax expense	$	597.7	$	563.7	$	467.2

Comparison of income tax expense (benefit) and tax computed at the statutory rate

Differences between income tax expense and tax computed by applying the federal statutory rate of 24.5% in fiscal 2018 and 35% in fiscal 2017 and 2016 to income before income taxes during each year is due to the following:



	Year Ended September 30,
	2018			2017			2016
	(In millions)
Income taxes at federal statutory rate	$	505.0		$	560.7		$	473.7
Increase (decrease) in tax resulting from:
State income taxes, net of federal benefit	59.4			42.3			38.6
Domestic production activities deduction	(36.7		)	(39.8		)	(36.3		)
Valuation allowance	(7.3		)	0.8			0.2
Tax credits	(19.0		)	(3.5		)	(15.9		)
Excess tax benefit from equity compensation	(21.2		)	—			—
Tax law change from enactment of Tax Act	108.7			—			—
Other	8.8			3.2			6.9
Total income tax expense	$	597.7		$	563.7		$	467.2

Components of deferred tax assets and liabilities

Components of deferred income taxes, including Forestar’s deferred tax assets and liabilities as of September 30, 2018, are summarized as follows:



	September 30,
	2018			2017
	(In millions)
Deferred tax assets:
Inventory costs	$	40.9		$	42.6
Inventory impairments	31.8			83.9
Warranty and construction defect costs	121.8			163.7
Net operating loss carryforwards	38.1			26.2
Tax credit carryforwards	4.3			2.5
Incentive compensation plans	55.2			92.6
Deferred income	1.3			1.7
Other	5.8			13.9
Total deferred tax assets	299.2			427.1
Valuation allowance	(17.7		)	(11.2		)
Total deferred tax assets, net of valuation allowance	281.5			415.9
Deferred tax liabilities:
Deferral of profit on home sales	64.9			41.6
Other	22.6			9.3
Total deferred tax liabilities	$	87.5		$	50.9
Deferred income taxes, net	$	194.0		$	365.0