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Income Taxes | 12 Months Ended
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Sep. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Note 18—Income Taxes The Company’s income before taxes by fiscal year consisted of the following:
| 2017 |  | 2016 |  | 2015
| (in millions)
U.S. | $ | 8,440 |  |  | $ | 5,839 |  |  | $ | 7,214 |
Non-U.S. | 3,254 |  |  | 2,173 |  |  | 1,781 |
Total income before taxes | $ | 11,694 |  |  | $ | 8,012 |  |  | $ | 8,995 |
U.S. income before taxes included $2.9 billion, $2.5 billion and $2.4 billion of the Company's U.S. entities' income from operations outside of the U.S. for fiscal 2017, 2016 and 2015, respectively. Income tax provision by fiscal year consisted of the following:
| 2017 |  | 2016 |  | 2015
| (in millions)
Current: |  |  |  |  |
U.S. federal | $ | 2,377 |  |  | $ | 2,250 |  |  | $ | 1,991 |
State and local | 291 |  |  | 181 |  |  | 168 |
Non-U.S. | 629 |  |  | 368 |  |  | 300 |
Total current taxes | 3,297 |  |  | 2,799 |  |  | 2,459 |
Deferred: |  |  |  |  |
U.S. federal | 1,607 |  |  | (508 | ) |  | 181 |
State and local | 66 |  |  | (63 | ) |  | 1 |
Non-U.S. | 25 |  |  | (207 | ) |  | 26 |
Total deferred taxes | 1,698 |  |  | (778 | ) |  | 208 |
Total income tax provision | $ | 4,995 |  |  | $ | 2,021 |  |  | $ | 2,667 |
The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 2017 and 2016, are presented below:
| 2017 |  | 2016
| (in millions)
Deferred Tax Assets: |  |  |
Accrued compensation and benefits | $ | 194 |  |  | $ | 277 |
Comprehensive loss | 29 |  |  | 106 |
Accrued litigation obligation | 373 |  |  | 373 |
Client incentives | 272 |  |  | 266 |
Net operating loss carryforwards | 45 |  |  | 32 |
Federal benefit of state taxes | 236 |  |  | 195 |
Federal benefit of foreign taxes | — |  |  | 1,214 |
Other | 193 |  |  | 280 |
Valuation allowance | (35 | ) |  | (31 | )
Deferred tax assets | 1,307 |  |  | 2,712 |
Deferred Tax Liabilities: |  |  |
Property, equipment and technology, net | (391 | ) |  | (278 | )
Intangible assets | (6,756 | ) |  | (7,013 | )
Foreign taxes | (59 | ) |  | (106 | )
Other | — |  |  | (101 | )
Deferred tax liabilities | (7,206 | ) |  | (7,498 | )
Net deferred tax liabilities | $ | (5,899 | ) |  | $ | (4,786 | )
In February 2017, the Company completed a reorganization of Visa Europe and certain other legal entities to align the Company's corporate structure to the geographic jurisdictions in which it conducts business operations. As a result of the reorganization, the Company recorded a $1.5 billion non-recurring, non-cash income tax provision primarily related to the elimination of deferred tax balances originally recognized upon the acquisition of Visa Europe in fiscal 2016. The increase in net deferred tax liabilities reflects the elimination of the deferred tax balances. At September 30, 2017 and 2016, net deferred tax assets of $81 million and $22 million, respectively, are reflected in other assets on the consolidated balance sheets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The fiscal 2017 and 2016 valuation allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years. As of September 30, 2017, the Company had $42 million federal, $27 million state and $140 million foreign net operating loss carryforwards. The federal and state net operating loss carryforwards will expire in fiscal 2026 through 2037. The foreign net operating loss may be carried forward indefinitely. The Company expects to fully utilize the federal and state net operating loss carryforwards in future years. As of September 30, 2017, the Company had $30 million of federal foreign tax credit carryforwards, which will expire in fiscal 2027. The Company expects to realize the benefit of the credit carryforwards in future years. The income tax provision differs from the amount of income tax determined by applying the applicable U.S. federal statutory rate of 35% to pretax income, as a result of the following:
| For the Years Ended September 30,
| 2017 |  | 2016 |  | 2015
| Dollars |  | Percent |  | Dollars |  | Percent |  | Dollars |  | Percent
| (in millions, except percentages)
U.S. federal income tax at statutory rate | $ | 4,093 |  |  | 35 | % |  | $ | 2,804 |  |  | 35 | % |  | $ | 3,148 |  |  | 35 | %
State income taxes, net of federal benefit | 200 |  |  | 2 | % |  | 135 |  |  | 2 | % |  | 194 |  |  | 2 | %
Non-U.S. tax effect, net of federal benefit | (641 | ) |  | (5 | )% |  | (553 | ) |  | (7 | )% |  | (327 | ) |  | (4 | )%
Reorganization of Visa Europe and other legal entities | 1,515 |  |  | 13 | % |  | — |  |  | — | % |  | — |  |  | — | %
Remeasurement of deferred tax liability | — |  |  | — | % |  | (88 | ) |  | (1 | )% |  | — |  |  | — | %
Reversal of prior years tax reserves related to the resolution of uncertain tax positions | — |  |  | — | % |  | — |  |  | — | % |  | (239 | ) |  | (2 | )%
Revaluation of Visa Europe put option | — |  |  | — | % |  | (89 | ) |  | (1 | )% |  | — |  |  | — | %
Other, net | (172 | ) |  | (2 | )% |  | (188 | ) |  | (3 | )% |  | (109 | ) |  | (1 | )%
Income tax provision | $ | 4,995 |  |  | 43 | % |  | $ | 2,021 |  |  | 25 | % |  | $ | 2,667 |  |  | 30 | %
As mentioned above, the February 2017 reorganization of Visa Europe and certain other legal entities resulted in a non-recurring, non-cash income tax provision of $1.5 billion primarily related to the elimination of deferred tax balances. Associated with this reorganization, the newly-formed Visa Foundation received all Visa Inc. shares held by Visa Europe that were previously recorded as treasury stock. The effective income tax rate was 43% in fiscal 2017 and 25% in fiscal 2016. The effective tax rate in fiscal 2017 differs from the effective tax rate in fiscal 2016 primarily due to:
• | the aforementioned $1.5 billion non-recurring, non-cash income tax provision related to the legal entity reorganization recorded in fiscal 2017;
• | $71 million tax benefit related to Visa Foundation's receipt of Visa Inc. shares mentioned above, recorded in fiscal 2017;
• | $70 million of excess tax benefits related to share-based payments recorded in fiscal 2017, as a result of the early adoption of Accounting Standards Update 2016-09. See Note 1—Summary of Significant Accounting Policies; and
• | the absence of:
▪ | the effect of one-time items related to the Visa Europe acquisition recorded during fiscal 2016, the most significant of which was the $1.9 billion U.S. loss related to the effective settlement of the Framework Agreement between Visa and Visa Europe. These one-time items impacted the geographic mix of global income, resulting in a reduced effective tax rate in fiscal 2016;
▪ | an $88 million one-time tax benefit due to the remeasurement of deferred tax liabilities as a result of the reduction in the UK tax rate enacted in fiscal 2016; and
▪ | the non-taxable $255 million revaluation of the Visa Europe put option recorded in fiscal 2016.
The effective income tax rate was 25% in fiscal 2016 and 30% in fiscal 2015. The effective tax rate in fiscal 2016 differs from the effective tax rate in fiscal 2015 primarily due to:
• | the effect of one-time items related to the Visa Europe acquisition, as mentioned above, that impacted the geographic mix of global income resulting in a reduced effective tax rate in fiscal 2016;
• | an $88 million one-time tax benefit due to the remeasurement of deferred tax liabilities as a result of the reduction in the UK tax rate enacted in fiscal 2016;
• | the non-taxable $255 million revaluation of the Visa Europe put option recorded in fiscal 2016; and
• | the absence of a $296 million tax benefit recognized in fiscal 2015 resulting from the resolution of uncertain tax positions with taxing authorities. Included in the $296 million was a one-time $239 million tax benefit that related to prior fiscal years.
Current income taxes receivable were $148 million and $232 million at September 30, 2017 and 2016, respectively. Non-current income taxes receivable of $755 million and $731 million were included in other assets at September 30, 2017 and 2016, respectively. At September 30, 2017 and 2016, income taxes payable of $243 million and $153 million, respectively, were included in accrued income taxes as part of accrued liabilities, and accrued income taxes of $1.1 billion and $911 million, respectively, were included in other long-term liabilities. See Note 7—Accrued and Other Liabilities. Cumulative undistributed earnings of the Company’s international subsidiaries that are intended to be reinvested indefinitely outside the United States amounted to $12.9 billion at September 30, 2017. The amount of income taxes that would have resulted had such earnings been repatriated is not practicably determinable. The Company’s largest operating hub outside the United States is located in Singapore. It operates under a tax incentive agreement which is effective through September 30, 2023, and is conditional upon meeting certain business operations and employment thresholds in Singapore. The tax incentive agreement decreased Singapore tax by $252 million, $235 million and $192 million, and the benefit of the tax incentive agreement on diluted earnings per share was $0.11, $0.10 and $0.08 in fiscal 2017, 2016 and 2015, respectively. In accordance with Accounting Standards Codification 740—Income Taxes, the Company is required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. At September 30, 2017 and 2016, the Company’s total gross unrecognized tax benefits were $1.4 billion and $1.2 billion, respectively, exclusive of interest and penalties described below. Included in the $1.4 billion and $1.2 billion are $1.1 billion and $926 million of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period. A reconciliation of beginning and ending unrecognized tax benefits by fiscal year is as follows:
| 2017 |  | 2016
| (in millions)
Beginning balance at October 1 | $ | 1,160 |  |  | $ | 1,051 |
Increases of unrecognized tax benefits related to prior years | 56 |  |  | 153 |
Decreases of unrecognized tax benefits related to prior years | (59 | ) |  | (180 | )
Increases of unrecognized tax benefits related to current year | 197 |  |  | 138 |
Reductions related to lapsing statute of limitations | (1 | ) |  | (2 | )
Ending balance at September 30 | $ | 1,353 |  |  | $ | 1,160 |
It is the Company’s policy to account for interest expense and penalties related to uncertain tax positions in non-operating expense in its consolidated statements of operations. The Company recognized $23 million and $15 million of interest expense in fiscal 2017 and 2016, respectively, and reversed $6 million of interest expense in fiscal 2015, related to uncertain tax positions. The Company accrued $1 million, $3 million and $1 million of penalties in fiscal 2017, 2016 and 2015, respectively, related to uncertain tax positions. At September 30, 2017 and 2016, the Company had accrued interest of $84 million and $61 million, respectively, and accrued penalties of $34 million and $17 million, respectively, related to uncertain tax positions in its other long-term liabilities. At September 30, 2017 and 2016, accrued interest and penalties balances included amounts related to the Visa Europe acquisition and measurement period adjustments. The Company's fiscal 2009 through 2012 U.S. federal income tax returns are currently under Internal Revenue Service (IRS) examination. The Company has filed a federal refund claim for fiscal year 2008, which is also currently under IRS examination. Except for the refund claim, the federal statutes of limitations have expired for fiscal years prior to 2009. The Company's fiscal years 2006 through 2011 California tax returns are currently under examination. The California statutes of limitations have expired for fiscal years prior to 2006. During fiscal 2013, the Canada Revenue Agency (CRA) completed its examination of the Company's fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments. Based on the findings of its examination, the CRA also proposed certain assessments to the Company's fiscal 2010 through 2016 Canadian tax returns. The Company filed notices of objection against these assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the CRA. In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA's assessments. Legal proceedings continue to be in progress. The Company continues to believe that its income tax provision adequately reflects its obligations to the CRA. The Company is also subject to examinations by various state and foreign tax authorities. All material state and foreign tax matters have been concluded for years through fiscal 2002. The timing and outcome of the final resolutions of the federal, state and foreign tax examinations and refund claims are uncertain. As such, it is not reasonably possible to estimate the impact that the final outcomes could have on the Company's unrecognized tax benefits in the next 12 months.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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