Alico, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Sep. 30, 2019

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act contains significant changes to corporate taxes, including a permanent reduction of the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. The Company’s statutory rate for the fiscal year ended September 30, 2018 was 24.5%, based on a fiscal year blended rate calculation. The 21% U.S. corporate tax rate is fully applicable to the fiscal year ended September 30, 2019 and each year thereafter.

The Act required a one-time remeasurement of certain tax related assets and liabilities. During the first quarter ended December 31, 2017, the Company made certain estimates related to the impact of the Act including the remeasurement of deferred taxes at the new expected tax rate and a revised effective tax rate for the year ended September 30, 2018. For the fiscal year ended September 30, 2018, the Company has recorded a tax benefit of approximately $9,847,000 to account for these deferred tax impacts.

In October 2019, the Internal Revenue Service concluded their audit of the September 30, 2015 tax year with no changes. The Federal and state filings remain subject to examination by tax authorities for tax periods ending after September 30, 2015.

The income tax provision (benefit) for the years ended September 30, 2019, 2018 and 2017 consists of the following:



(in thousands)	Fiscal Year Ended September 30,
	2019		2018			2017
Current:
Federal income tax	$	7,314	$	1,961		$	102
State income tax	2,202		384			—
Total current	9,516		2,345			102

Deferred:
Federal income tax	2,995		(3,917		)	(3,286		)
State income tax	272		1,962			(662		)
Total deferred	3,267		(1,955		)	(3,948		)
Income tax provision (benefit)	$	12,783	$	390		$	(3,846	)

Income tax provision (benefit) attributable to income (loss) before income taxes differed from the amount computed by applying the statutory federal income tax rate of 21%, 24.53% and 35% to income (loss) before income taxes for the fiscal years ended September 30, 2019, September 30, 2018 and September 30, 2017, respectively, as a result of the following:



(in thousands)	Fiscal Year Ended September 30,
	2019		2018			2017
Income tax (benefit) at the statutory federal rate	$	10,587	$	3,198		$	(4,670	)
Increase (decrease) resulting from:
State income taxes, net of federal benefit	1,947		857			(402		)
Permanent and other reconciling items, net	166		221			548
Expiration of capital loss carryforward	—		5,634			581
Reduction in deferred tax liability resulting from the Act	—		(9,847		)	—
Stock option cancellation	—		347			—
Other	83		(20		)	97
Income taxes provision (benefit)	$	12,783	$	390		$	(3,846	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2019, and 2018 are presented below:



(in thousands)	September 30,
	2019			2018
Deferred tax assets:
Deferred retirement benefits	$	1,325		$	1,114
Investment in Citree	—			89
Deferred gain recognition	—			6,318
Goodwill	18,244			20,095
Inventories	930			711
Stock compensation	237			261
Accrued bonus	—			612
Tax credits	—			28
Intangibles	565			620
Other	168			190
Total deferred tax assets	21,469			30,038

Deferred tax liabilities:
Revenue recognized from citrus and sugarcane	—			162
Property and equipment	52,551			54,925
Investment in Citree	909			—
Prepaid insurance	134			104
Total deferred tax liabilities	53,594			55,191
Net deferred income tax liabilities	$	(32,125	)	$	(25,153	)