Entity information:
INCOME TAXES
 
WGL files a consolidated federal tax return and state returns where there is a business presence. We are no longer subject to income tax examinations by the Internal Revenue Service (IRS) for years ended prior to September 30, 2013 except for pending carryback refund claims. Substantially all state income tax years in major jurisdictions are closed for years ended prior to September 30, 2013.
WGL and each of its subsidiaries participate in a tax sharing agreement that establishes the method for allocating tax benefits from losses that are utilized on the consolidated income tax return. The consolidated tax is apportioned among the subsidiaries on the separate return method and losses are allocated to the subsidiaries that have taxable income pro-rata basis. In fiscal year 2017, Washington Gas recognized a receivable for $18.6 million from subsidiaries with taxable income for the utilization of Washington Gas' net operating loss pursuant to the tax sharing agreement. State income tax returns are filed on a separate company basis in most states where we have operations and/or a requirement to file.
On September 13, 2013, the U.S. Treasury Department issued final income tax regulations to address the costs incurred in acquiring, producing, or improving tangible property. The regulations are effective for WGL and Washington Gas for the tax year beginning October 1, 2014. WGL and Washington Gas filed Forms 3115 along with its income tax return for the year ended September 30, 2015 in June 2016. The financial impact of these regulations did not have a material impact on the financial statements.

On October 1, 2015, WGL and Washington Gas early adopted ASU 2015-17. This standard amends the requirements to separately classify deferred income tax liabilities and assets into current and non-current amounts on a classified balance sheet, and requires all deferred income tax liabilities and assets to be offset by taxing jurisdiction and classified as non-current. WGL and Washington Gas applied ASU 2015-17 retrospectively. As a result of the retrospective adoption, $32.8 million and $24.7 million were reclassified from "Current Assets-Deferred income taxes" to "Deferred Credits-Deferred income taxes" on WGL's and Washington Gas' September 30, 2015 balance sheets, respectively.

The tables below provide the following for WGL and Washington Gas: (i) the components of income tax expense; (ii) a reconciliation between the statutory federal income tax rate and the effective income tax rate and (iii) the components of accumulated deferred income tax assets and liabilities at September 30, 2017 and 2016.
 
WGL Holdings, Inc.
Components of Income Tax Expense
  
Years Ended September 30,
(In thousands)
2017
 
2016
 
2015
INCOME TAX EXPENSE
 
 
 
 
 
Current:
 
 
 
 
 
Federal
$
430

 
$
(57,690
)
 
$
(18,639
)
State
3,267

 
(1,983
)
 
2,977

Total current
3,697

 
(59,673
)
 
(15,662
)
Deferred:
 
 
 
 
 
Federal
 
 
 
 
 
Accelerated depreciation
83,637

 
93,175

 
71,529

Other
13,042

 
49,638

 
17,726

State
 
 
 
 
 
Accelerated depreciation
15,097

 
12,993

 
13,739

Other
3,190

 
8,073

 
1,411

Total deferred
114,966

 
163,879

 
104,405

Amortization of investment tax credits
(7,504
)
 
(6,132
)
 
(4,939
)
Total income tax expense
$
111,159

 
$
98,074

 
$
83,804


 

WGL Holdings, Inc.
Reconciliation Between the Statutory Federal Income Tax Rate and Effective Tax Rate
  
Years Ended September 30,
($ In thousands)
2017
 
2016
 
2015
Income taxes at statutory federal income tax rate
$
101,157

35.00
 %
 
$
93,253

35.00
 %
 
$
75,760

35.00
 %
Increase (decrease) in income taxes resulting from:
 
 
 
 
 
 
 
 
Accelerated depreciation less amount deferred
589

0.20

 
908

0.34

 
1,187

0.55

Amortization of investment tax credits
(7,504
)
(2.60
)
 
(6,132
)
(2.30
)
 
(4,939
)
(2.28
)
Cost of removal
(2,944
)
(1.02
)
 
(3,722
)
(1.40
)
 
(2,721
)
(1.26
)
State income taxes-net of federal benefit
12,601

4.36

 
12,969

4.87

 
11,109

5.13

ASDHI impairment
—

—

 
—

—

 
1,969

0.91

Merger related costs
2,292

0.79

 
—

—

 
—

—

Non-controlling interest
5,627

1.95

 
—

—

 
—

—

Other items-net
(659
)
(0.23
)
 
798

0.30

 
1,439

0.66

Total income tax expense and effective tax rate
$
111,159

38.45
 %
 
$
98,074

36.81
 %
 
$
83,804

38.71
 %

 

WGL Holdings, Inc.
Components of Accumulated Deferred Income Tax Assets (Liabilities)
  
 
(In thousands)
2017
 
2016
Deferred income tax assets:
 
 
 
 
 
Pensions
 
$
42,593

 
 
$
60,685

Uncollectible accounts
 
10,617

 
 
12,441

Inventory overheads
 
6,617

 
 
5,046

Employee compensation and benefits
 
45,202

 
 
49,443

Derivatives
 
13,802

 
 
58,203

Deferred gas costs
 
1,485

 
 
—

Solar grant/investment tax credit
 
61,773

 
 
64,149

Tax credit carry forward
 
160,077

 
 
118,980

Net operating loss
 
30,278

 
 
27,741

Other(a)
 
2,693

 
 
1,075

Total assets
 
375,137

 
 
397,763

Deferred income tax liabilities:
 
 
 
 
 
Other post-retirement benefits
 
90,031

 
 
69,899

Accelerated depreciation and other plant related items
 
1,068,951

 
 
949,807

Losses/gains on reacquired debt
 
1,047

 
 
1,155

Income taxes recoverable through future rates
 
33,502

 
 
71,352

Deferred gas costs
 
—

 
 
1,696

Partnership basis differences
 
46,968

 
 
27,532

Valuation allowances
 
2,188

 
 
2,188

Total liabilities
 
1,242,687

 
 
1,123,629

Net accumulated deferred income tax assets (liabilities)
 
$
(867,550
)
 
 
$
(725,866
)

(a) For the fiscal years ended September 30, 2017 and 2016, amount includes $0.5 million and $0.9 million, respectively, in deferred income tax assets reported in "Deferred charges and other assets" on the consolidated balance sheet.
Washington Gas Light Company
Components of Income Tax Expense
  
Years Ended September 30,
(In thousands)
2017
 
2016
 
2015
INCOME TAX EXPENSE
 
 
 
 
 
Current:
 
 
 
 
 
Federal
$
1,722

 
$
(48,064
)
 
$
(5,305
)
State
1,283

 
(2,957
)
 
907

Total current
3,005

 
(51,021
)
 
(4,398
)
Deferred:
 
 
 
 
 
Federal
 
 
 
 
 
Accelerated depreciation
83,009

 
93,385

 
71,046

Other
(18,419
)
 
13,826

 
(6,619
)
State
 
 
 
 
 
Accelerated depreciation
15,033

 
13,081

 
13,701

Other
(2,037
)
 
3,190

 
(1,507
)
Total deferred
77,586

 
123,482

 
76,621

Amortization of investment tax credits
(751
)
 
(795
)
 
(832
)
Total income tax expense
$
79,840

 
$
71,666

 
$
71,391


 
Washington Gas Light Company
Reconciliation Between the Statutory Federal Income Tax Rate and Effective Tax Rate
  
Years Ended September 30,
($ In thousands)
2017
 
2016
 
2015
Income taxes at statutory federal income tax rate
$
74,071

 
35.00
 %
 
$
64,673

 
35.00
 %
 
$
63,024

 
35.00
 %
Increase (decrease) in income taxes resulting from:
 
 
 
 
 
 
 
 
 
 
 
Accelerated depreciation less amount deferred
1,922

 
0.91

 
1,936

 
1.05

 
2,108

 
1.17

Amortization of investment tax credits
(751
)
 
(0.35
)
 
(795
)
 
(0.43
)
 
(832
)
 
(0.46
)
Cost of removal
(2,944
)
 
(1.39
)
 
(3,722
)
 
(2.01
)
 
(2,721
)
 
(1.51
)
State income taxes-net of federal benefit
8,610

 
4.07

 
8,310

 
4.50

 
8,986

 
4.99

Consolidated tax sharing allocation
—

 
—

 
1,073

 
0.58

 
(533
)
 
(0.30
)
Other items-net
(1,068
)
 
(0.50
)
 
191

 
0.10

 
1,359

 
0.76

Total income tax expense and effective tax rate
$
79,840

 
37.74
 %
 
$
71,666

 
38.79
 %
 
$
71,391

 
39.65
 %


Washington Gas Light Company
Components of Accumulated Deferred Income Tax Assets (Liabilities)
  
 
(In thousands)
2017
 
2016
Deferred income tax assets:
 
 
 
 
 
Pensions
 
$
41,907

 
 
$
59,878

Uncollectible accounts
 
7,815

 
 
8,054

Inventory overheads
 
6,617

 
 
5,046

Employee compensation and benefits
 
47,479

 
 
43,755

Derivatives
 
11,187

 
 
27,394

Deferred gas costs
 
1,485

 
 
—

Net operating loss
 
—

 
 
24,588

Total assets
 
116,490

 
 
168,715

Deferred income tax liabilities:
 
 
 
 
 
Other post-retirement benefits
 
89,494

 
 
69,520

Accelerated depreciation and other plant related items
 
876,235

 
 
783,919

Losses/gains on reacquired debt
 
1,047

 
 
1,155

Income taxes recoverable through future rates
 
33,324

 
 
71,063

Deferred gas costs
 
—

 
 
1,696

Other
 
4,775

 
 
5,082

Total liabilities
 
1,004,875

 
 
932,435

Net accumulated deferred income tax assets (liabilities)
 
$
(888,385
)
 
 
$
(763,720
)

In June 2017, we filed our tax return for the year ended September 30, 2016.
The following table summarizes the change in unrecognized tax benefits during fiscal year 2017, 2016, 2015 and our total unrecognized tax benefits at September 30, under the provisions of ASC Topic 740, Income Taxes:
 
Unrecognized Tax Benefits
(In thousands)
2017
 
2016
 
2015
Total unrecognized tax benefits, October 1,
$
42,283

 
$
38,627

 
$
32,613

Increases in tax positions relating to current year
10,766

 
10,645

 
12,848

Decreases in tax positions relating to prior year
(5,040
)
 
(6,989
)
 
(6,834
)
Total unrecognized tax benefits, September 30,
$
48,009

 
$
42,283

 
$
38,627


During the year, the unrecognized tax benefits for WGL and Washington Gas increased by approximately $5.7 million relating to uncertain tax positions, primarily due to the change in tax accounting for repairs. If the amounts of unrecognized tax benefits are eventually realized, it would not materially impact the effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefit with respect to some of WGL’s and Washington Gas’ uncertain tax positions will significantly increase or decrease in the next 12 months. The IRS completed its audit of the tax years related to the change in accounting method for repairs without proposing any changes, however, they could re-examine this issue in the future.
 
WGL and Washington Gas recognize any accrued interest associated with uncertain tax positions in interest expense and recognizes any accrued penalties associated with uncertain tax positions in other expenses in the statements of income. During the fiscal year ended September 30, 2017, 2016, and 2015, there was no accrued interest expense associated with uncertain tax positions.