INCOME TAXES
The details of income tax expense are as follows:
|
| | | | | | | | | | | | |
| | Years Ended September 30 |
| | 2017 | | 2016 | | 2015 |
| Current income taxes: | | | | | |
| Federal | $ | 72,368 |
| | $ | (1,216,745 | ) | | $ | 379,180 |
|
| State | 407,643 |
| | 415,975 |
| | 374,541 |
|
| Total current income taxes | 480,011 |
| | (800,770 | ) | | 753,721 |
|
| Deferred income taxes: | | | | | |
| Federal | 3,129,925 |
| | 4,302,906 |
| | 2,289,729 |
|
| State | 195,454 |
| | 164,048 |
| | 127,112 |
|
| Total deferred income taxes | 3,325,379 |
| | 4,466,954 |
| | 2,416,841 |
|
| Total income tax expense | $ | 3,805,390 |
| | $ | 3,666,184 |
| | $ | 3,170,562 |
|
Income tax expense for the years ended September 30, 2017, 2016 and 2015 differed from amounts computed by applying the U.S. Federal income tax rate of 34% to earnings before income taxes due to the following:
|
| | | | | | | | | | | | |
| | Years Ended September 30 |
| | 2017 | | 2016 | | 2015 |
| Income before income taxes | $ | 10,038,255 |
| | $ | 9,473,050 |
| | $ | 8,264,977 |
|
| Income tax expense computed at the federal statutory rate | $ | 3,413,007 |
| | $ | 3,220,837 |
| | $ | 2,810,092 |
|
| State income taxes, net of federal income tax benefit | 398,044 |
| | 382,815 |
| | 331,091 |
|
| Other, net | (5,661 | ) | | 62,532 |
| | 29,379 |
|
| Total income tax expense | $ | 3,805,390 |
| | $ | 3,666,184 |
| | $ | 3,170,562 |
|
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows:
|
| | | | | | | | |
| | September 30 |
| | 2017 | | 2016 |
| Deferred tax assets: | | | |
| Allowance for uncollectibles | $ | 37,752 |
| | $ | 29,203 |
|
| Accrued pension and postretirement medical benefits | 1,747,429 |
| | 2,532,672 |
|
| Accrued vacation | 239,414 |
| | 262,273 |
|
| Over-recovery of gas costs | 545,894 |
| | 345,318 |
|
| Costs of gas held in storage | 1,009,206 |
| | 1,077,849 |
|
| Deferred compensation | 824,281 |
| | 770,868 |
|
| Other | 348,833 |
| | 340,121 |
|
| Total gross deferred tax assets | 4,752,809 |
| | 5,358,304 |
|
| Deferred tax liabilities: | | | |
| Utility plant | 27,630,486 |
| | 24,264,165 |
|
| MVP investment | 154,817 |
| | 40,776 |
|
| Other | 44,354 |
| | 11,217 |
|
| Total gross deferred tax liabilities | 27,829,657 |
| | 24,316,158 |
|
| Net deferred tax liability | $ | 23,076,848 |
| | $ | 18,957,854 |
|
The current federal tax expense for fiscal 2016 reflected the effect of 50% bonus depreciation for the entire fiscal year 2016 as well as for nine months of fiscal 2015. The Protecting Americans from Tax Hikes (PATH Act), which extended 50% bonus depreciation for calendar 2015, was signed into law on December 18, 2015, subsequent to the issuance of the Company's September 30, 2015 annual report. As a result, $1,283,925 of deferred taxes that related to fiscal 2015 bonus depreciation were reflected in the fiscal 2016 tax provision, thereby reducing the current tax expense and increasing deferred tax expense by the same amount. The same situation occurred in fiscal 2014 when the extension of 50% bonus depreciation was not signed into law until December 19, 2014, following the issuance of the Company's financial statements for the year ended September 30, 2014. Correspondingly, fiscal 2015 income tax expense included the tax effect of the 50% bonus depreciation for fixed asset additions during the last nine months of fiscal 2014, which resulted in $1,442,211 in deferred tax expense related to fiscal 2014 being included in fiscal 2015. The recording of the effect of the adjustments for bonus depreciation had no effect on total income tax expense, net income or earnings per share. Only the current and deferred components of income tax expense and their corresponding assets and liabilities were affected.
Under the PATH Act, 50% bonus depreciation extends through December 31, 2017, 40% for calendar 2018 and 30% for calendar 2019 with no provision for bonus depreciation after 2019. Virginia tax law does not recognize bonus depreciation; therefore, state income taxes were not impacted by the delayed bonus depreciation extensions.
FASB ASC No. 740 - Income Taxes provides for the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recognized in the financial statements. The Company has evaluated its tax positions and accordingly has not identified any significant uncertain tax positions. The Company’s policy is to classify interest associated with uncertain tax positions as interest expense in the financial statements. Penalties are classified under other expense.
The Company files a consolidated federal income tax return and state income tax returns in Virginia and West Virginia. The federal returns and the state returns for both Virginia and West Virginia for the tax years ended prior to September 30, 2014 are no longer subject to examination.