Entity information:
INCOME TAXES

For a discussion of our income tax accounting policies and other income tax-related information see Note 2.

Total income tax provision/(benefit) was allocated as follows:
 
 
Year ended September 30,
$ in thousands
 
2017
 
2016
 
2015
Recorded in:
 
 
 
 
 
 
Net income including noncontrolling interests
 
$
289,111

 
$
271,293

 
$
296,034

Equity, arising from cash flow hedges recorded through OCI
 
14,239

 
(7,252
)
 
(2,850
)
Equity, arising from cumulative currency translation adjustments and net investment hedges recorded through OCI
 
(7,427
)
 
(3,525
)
 
31,078

Equity, arising from available-for-sale securities recorded through OCI
 
856

 
(3,295
)
 
(2,246
)
Equity, arising from compensation expense for tax purposes which was (in excess of)/less than amounts recognized for financial reporting purposes
 
—

 
(35,121
)
 
8,115

Total
 
$
296,779

 
$
222,100

 
$
330,131



Effective October 1, 2016, we adopted the new accounting guidance related to stock compensation. The amended guidance involves several aspects of the accounting for share-based payment transactions, including the income tax consequences. Under the new guidance, all tax effects related to share-based payments are recorded through tax expense in the periods during which the awards are exercised or vest, as applicable. See Note 2 and Note 20 for additional information on our adoption of this new accounting guidance during the period.

Our provision/(benefit) for income taxes consisted of the following:
 
 
Year ended September 30,
$ in thousands
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
 
Federal
 
$
255,555

 
$
287,350

 
$
266,359

State and local
 
37,553

 
32,101

 
48,130

Foreign
 
7,620

 
10,640

 
5,007

 
 
300,728

 
330,091

 
319,496

Deferred:
 
 
 
 
 
 
Federal
 
(11,316
)
 
(51,383
)
 
(20,567
)
State and local
 
(959
)
 
(6,267
)
 
(5,127
)
Foreign
 
658

 
(1,148
)
 
2,232

 
 
(11,617
)
 
(58,798
)
 
(23,462
)
Total provision for income tax
 
$
289,111

 
$
271,293

 
$
296,034



A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:
 
 
Year ended September 30,
 
 
2017
 
2016
 
2015
Provision calculated at statutory rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State income tax, net of federal benefit
 
2.7
 %
 
1.7
 %
 
3.6
 %
Tax-exempt interest income
 
(1.0
)%
 
(0.9
)%
 
(0.5
)%
Excess tax benefits related to share-based compensation (1)
 
(2.5
)%
 
—

 
—

(Income)/losses associated with COLI which are not (subject to tax)/tax deductible
 
(1.7
)%
 
(1.1
)%
 
0.4
 %
Federal tax credits
 
(1.6
)%
 
(1.0
)%
 
(0.9
)%
Other, net
 
0.3
 %
 
0.2
 %
 
(0.5
)%
Total provision for income tax
 
31.2
 %
 
33.9
 %

37.1
 %


(1) Does not include excess state tax benefits related to share-based compensation, which had an impact of reducing our effective tax rate by (0.2)% for 2017. See Note 2 and Note 20 for more information regarding the adoption of new accounting guidance related to stock compensation.

U.S. and foreign components of income excluding noncontrolling interests and before provision for income taxes were as follows:
 
 
Year ended September 30,
$ in thousands
 
2017
 
2016
 
2015
U.S.
 
$
915,711

 
$
765,421

 
$
782,146

Foreign
 
9,635

 
35,222

 
16,028

Income excluding noncontrolling interests and before provision for income taxes
 
$
925,346

 
$
800,643

 
$
798,174



The cumulative effects of temporary differences that give rise to significant portions of the deferred tax asset/(liability) items are as follows:
 
 
September 30,
$ in thousands
 
2017
 
2016
Deferred tax assets:
 
 
 
 
Deferred compensation
 
$
235,171

 
$
192,397

Allowances for loan losses and reserves for unfunded commitments
 
74,909

 
78,552

Unrealized loss associated with foreign currency translations
 
1,928

 
22,184

Unrealized loss associated with available-for-sale securities
 
3,342

 
4,314

Accrued expenses
 
41,545

 
44,419

Other
 
13,665

 
24,897

Total gross deferred tax assets
 
370,560

 
366,763

Less: valuation allowance
 
(9
)
 
(9
)
Total deferred tax assets
 
370,551

 
366,754

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Partnership investments
 
(6,326
)
 
(8,518
)
Goodwill and other intangibles
 
(38,364
)
 
(26,384
)
Undistributed earnings of foreign subsidiaries
 
—

 
(9,636
)
Other
 
(12,375
)
 
(192
)
Total deferred tax liabilities
 
(57,065
)
 
(44,730
)
Net deferred tax assets
 
$
313,486

 
$
322,024



We had a net deferred tax asset at September 30, 2017 and 2016. This asset includes net operating losses that will expire between 2018 and 2030. A valuation allowance for the fiscal year ended September 30, 2017 has been established for certain state net operating losses due to management’s belief that, based on our historical operating income, projection of future taxable income, scheduled reversal of taxable temporary differences, and implemented tax planning strategies, it is more likely than not that the tax carryforwards will expire unutilized. We believe that the realization of the remaining net deferred tax asset of $313 million is more likely than not based on the ability to carry back losses against prior year taxable income and expectations of future taxable income.

As of September 30, 2017, we consider all undistributed earnings of non-U.S. subsidiaries to be permanently reinvested and, therefore, we have not provided for any U.S. deferred income taxes. As of September 30, 2017, we had approximately $219 million of cumulative undistributed earnings attributable to foreign subsidiaries for which no provisions have been recorded for income taxes that could arise upon repatriation. Because the time or manner of repatriation is uncertain, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings, and therefore cannot quantify the tax liability that would be payable in the event all such foreign earnings are repatriated.

As of September 30, 2017, the current tax receivable, which is included in “Other receivables” in our Consolidated Statements of Financial Condition, was $102 million, and the current tax payable, which is included in “Other payables,” was $23 million. As of September 30, 2016, the current tax receivable was $48 million and the current tax payable was $29 million.

Balances associated with unrecognized tax benefits

We recognize the accrual of interest and penalties related to income tax matters in interest expense and other expense, respectively. As of September 30, 2017 and 2016, accrued interest and penalties were approximately $3 million and $4 million, respectively.

The aggregate changes in the balances for uncertain tax positions were as follows:
 
 
Year ended September 30,
$ in thousands
 
2017
 
2016
 
2015
Balance for uncertain tax positions at beginning of year
 
$
22,173

 
$
22,454

 
$
15,804

Increases for tax positions related to the current year
 
3,238

 
6,496

 
4,954

Increases for tax positions related to prior years (1)
 
438

 
1,284

 
3,466

Decreases for tax positions related to prior years
 
(717
)
 
(1,592
)
 
(204
)
Decreases due to lapsed statute of limitations
 
(2,497
)
 
(1,447
)
 
(1,566
)
Decreases related to settlements
 
(2,629
)
 
(5,022
)
 
—

Balance for uncertain tax positions at end of year
 
$
20,006

 
$
22,173

 
$
22,454


(1)
The increases are primarily due to tax positions taken in previously filed tax returns with certain states. We continue to evaluate these positions and intend to contest any proposed adjustments made by taxing authorities.

The total amount of uncertain tax positions that, if recognized, would impact the effective tax rate (the items included in the table above after considering the federal tax benefit associated with any state tax provisions) was $15 million, $16 million, and $15 million at September 30, 2017, 2016, 2015, respectively.  We anticipate that the uncertain tax position balance will not change significantly over the next 12 months.

We file U.S. federal income tax returns as well as returns with various state, local and foreign jurisdictions. With few exceptions, we are generally no longer subject to U.S. federal, state and local, or foreign income tax examination by tax authorities for years prior to fiscal year 2014 for federal tax returns, fiscal year 2013 for state and local tax returns and fiscal year 2013 for foreign tax returns.  Various foreign and state audits in process are expected to be completed in fiscal year 2018.