|6 Months Ended|
Mar. 31, 2020
|Income Tax Disclosure [Abstract]|
The effective tax rates for the three months ended March 31, 2020 and 2019 were (2.6%) and 25.9%, respectively. The negative effective tax rate in the current quarter and the difference from the prior year is due to the current quarter loss position and the discrete recognition of tax expense on the divestiture of Cimcool, which provided a decrease in the effective tax rate.
The effective tax rates for the six months ended March 31, 2020 and 2019 were 12.7% and 29.2%, respectively. Due to the current year net loss position, the effective tax rate decreased over the prior year as a result of the discrete recognition of tax expense on the divestiture of Cimcool, partially offset by the tax benefit recognized in 2020 from the revaluation of current and deferred tax balances in connection with the enacted statutory tax rate reductions in certain foreign jurisdictions. The change in the effective tax rate compared to the prior year was also impacted by the prior year increase in the reserve for unrecognized tax benefits that did not recur in the current year.
The acquisition of Milacron was completed as a taxable acquisition of the outstanding common stock of Milacron. In connection with the acquisition, the Company recorded a net deferred tax liability of $138.0 associated with the difference between the financial accounting basis and the tax basis in the acquired assets and liabilities assumed. Included in the acquired deferred taxes were deferred tax assets for the carryforward of Milacron’s tax net operating losses from federal, state, and foreign tax jurisdictions of $65.1, which were partially offset by the recognition of preliminary valuation allowances of $25.6 related to the estimated realizability of these items. The utilization of the acquired U.S. federal and state net operating losses to reduce Hillenbrand’s taxable income will be limited annually under Section 382 of the Internal Revenue Code. The Section 382 limitation analysis is in process as part of purchase accounting finalization and was not completed as of March 31, 2020. Additionally, Hillenbrand incurred transaction costs of $0.3 and $43.2 during the three and six months ended March 31, 2020, respectively, associated with the acquisition of Milacron. A preliminary estimate of the nondeductible portion of these costs has been determined to be approximately $24.9 and recognized as an adjustment to the forecasted tax rate for the year. As the Company continues to analyze the tax attributes of the acquisition, it will revise these preliminary estimates and appropriately record the impact of any changes in estimates.
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://fasb.org/us-gaap/role/ref/legacyRef