|12 Months Ended|
Sep. 30, 2020
|Income Tax Disclosure [Abstract]|
|Income taxes||Income taxes
The components of income before income taxes and the corresponding provision for income taxes are as follows:
The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017. Among other things, the Act reduced the U.S. Federal tax rate from 35% to 21% from January 1, 2018.
In the first quarter of fiscal year 2019, we completed our assessment of the effects of the Act and recognized a tax benefit of $0.5 million related to our calculation of the transition tax liability, referred to as the "toll tax." In the year ending September 30, 2018, we recorded a toll tax charge of $9.4 million and a benefit of $10.5 million from reductions in our deferred tax liabilities.
Our federal statutory income tax rate prior to December 31, 2017, was 35%; for subsequent periods, it was 21%. The provision for income taxes differs from that which would have resulted from the use of this rate is as follows:
The significant items comprising our deferred tax assets and liabilities as of September 30, 2020 and 2019, are as follows:
Our deferred tax assets and liabilities are held in various national and international jurisdictions that do not allow right of offset. Accordingly, our presentation of deferred taxes on our consolidated balance sheets is split between jurisdictions that show a net deferred tax asset and a net deferred tax liability. Our net deferred tax position is summarized below:
We consider our foreign earnings in excess of the earnings subject to the one-time transition tax to be indefinitely reinvested outside of the U.S. in accordance with the relevant accounting guidance for income taxes. Accordingly, no U.S. deferred taxes were recorded with respect to such earnings. As of September 30, 2020, our foreign subsidiaries held approximately $44.4 million of cash and cash equivalents in either U.S. Dollars or local currencies.
Cash paid for income taxes during the years ended September 30, 2020, 2019, and 2018, was $89.1 million, $69.2 million and $65.3 million, respectively.
The provision for income taxes includes all provision to return adjustments included in the year recognized in the financial statements.
We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is "more-likely-than-not" that the position will be sustained upon examination. The total amount of unrecognized tax benefits that, if recognized, would affect our annual effective income tax rate was $1.8 million and $3.6 million at September 30, 2020 and 2019, respectively.
We report interest and penalties as a component of income tax expense. In the fiscal years ending September 30, 2020, 2019, and 2018, we recognized interest expense relating to unrecognized tax benefits of less than $0.1 million in each year. The net liability balance at September 30, 2020 and 2019, includes less than $0.1 million and approximately $0.8 million, respectively, of interest and penalties.
We recognize and present uncertain tax positions on a gross basis (i.e., without regard to likely offsets for deferred tax assets, deductions and/or credits that would result from payment of uncertain tax amounts). The reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows:
We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are no longer subject to federal income tax examinations for years before 2017 and to state and local income tax examinations by tax authorities for years before 2015. In international jurisdictions, similar rules apply to filed income tax returns, although the tax examination limitations and requirements may vary. We are no longer subject to audit by tax authorities for foreign jurisdictions for years prior to 2016.
In response to the COVID-19 pandemic, on March 18, 2020, the Families First Coronavirus Response Act (FFCRA) was enacted, and on March 27, 2020, the CARES Act was enacted. The FFCRA and the CARES Act contain numerous income tax provisions to assist companies from an income tax perspective. The following summarizes the most significant provisions and includes the impact to Maximus.
•Eliminating the taxable income limitation and allowing companies to fully utilize Net Operating Losses (NOL’s) generated in the current year against prior years. Maximus is projecting a U.S. taxable income for the current year and will not be utilizing this provision.
•Allowing NOL’s originating in fiscal years 2018 through 2020 to be carried back five years. This is non-applicable as Maximus had taxable income in each year.
•Increasing the net interest expense deduction to 50% of adjusted taxable income from 30% for years beginning January 1, 2019 and 2020. The limitation for Maximus based on the current provision would be approximately $92.0 million, and as our interest expense in the current year is less than $2.1 million, we are not impacted by the limitation.
•Allowing taxpayers with Alternative Minimum Tax (AMT) credits to claim a refund in 2020. Maximus does not have any AMT credits to utilize.
•Allowing companies to deduct more of their cash charitable contributions paid during the calendar year by increasing the taxable income limitation from 10% to 25%. Maximus has never been limited in any year for charitable deductions and does not anticipate having any limitations in the current year.•Retroactively clarifying the immediate recovery of qualified improvement property costs rather than over a 39 year period. Maximus reversed the reserve recorded at September 30, 2019, in the first quarter of the current year.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef