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Income Taxes | 12 Months Ended
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Sep. 30, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19—Income Taxes The Company’s income before taxes by fiscal year consisted of the following:
| For the Years Ended September 30,
| 2022 |  | 2021 |  | 2020
| (in millions)
U.S. | $ | 11,051 |  |  | $ | 11,002 |  |  | $ | 9,178 |
Non-U.S. | 7,085 |  |  | 5,061 |  |  | 4,612 |
Total income before taxes | $ | 18,136 |  |  | $ | 16,063 |  |  | $ | 13,790 |
For fiscal 2022, 2021 and 2020, U.S. income before taxes included $3.6 billion, $3.1 billion, and $3.0 billion, respectively, of the Company’s U.S. entities’ income from operations outside of the U.S. Income tax provision by fiscal year consisted of the following:
| For the Years Ended September 30,
| 2022 |  | 2021 |  | 2020
| (in millions)
Current: |  |  |  |  |
U.S. federal | $ | 2,166 |  |  | $ | 1,943 |  |  | $ | 1,662 |
State and local | 104 |  |  | 69 |  |  | 212 |
Non-U.S. | 1,245 |  |  | 869 |  |  | 743 |
Total current taxes | 3,515 |  |  | 2,881 |  |  | 2,617 |
Deferred: |  |  |  |  |
U.S. federal | (231) |  |  | (57) |  |  | 42 |
State and local | (77) |  |  | (28) |  |  | 9 |
Non-U.S. | (28) |  |  | 956 |  |  | 256 |
Total deferred taxes | (336) |  |  | 871 |  |  | 307 |
Total income tax provision | $ | 3,179 |  |  | $ | 3,752 |  |  | $ | 2,924 |
The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities, are presented below:
| September 30,
| 2022 |  | 2021
| (in millions)
Deferred Tax Assets: |  |  |
Accrued compensation and benefits | $ | 172 |  |  | $ | 166 |
Accrued litigation obligation | 331 |  |  | 234 |
Client incentives | 442 |  |  | 327 |
Net operating loss carryforwards | 117 |  |  | 104 |
Comprehensive loss | 21 |  |  | 106 |
Federal benefit of state taxes | 133 |  |  | 157 |
Other | 71 |  |  | 55 |
Valuation allowance | (120) |  |  | (103) |
Deferred tax assets | 1,167 |  |  | 1,046 |
Deferred Tax Liabilities: |  |  |
Property, equipment and technology, net | (450) |  |  | (346) |
Intangible assets | (5,788) |  |  | (6,452) |
Unrealized gains on equity securities | (124) |  |  | (203) |
Foreign taxes | (50) |  |  | (93) |
Deferred tax liabilities | (6,412) |  |  | (7,094) |
Net deferred tax liabilities | $ | (5,245) |  |  | $ | (6,048) |
The Inflation Reduction Act (IRA) of 2022 was enacted in the U.S. on August 16, 2022, primarily including a 15% corporate alternative minimum tax on adjusted financial statement income applicable beginning in fiscal 2024 and a 1% excise tax on corporate stock buy-backs applicable to stock buy-backs after December 31, 2022. The IRA is not expected to have a material impact on the Company’s financial statements. At September 30, 2022 and 2021, net deferred tax assets of $87 million and $80 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 2022 and 2021 valuation allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years. As of September 30, 2022, the Company had $517 million foreign net operating loss carryforwards from acquired subsidiaries. Foreign net operating losses may be carried forward indefinitely. The income tax provision differs from the amount of income tax determined by applying the applicable U.S. federal statutory rate to pretax income, as a result of the following:
| For the Years Ended September 30,
| 2022 |  | 2021 |  | 2020
| (in millions, except percentages)
U.S. federal income tax at statutory rate | $ | 3,809 |  |  | 21 | % |  | $ | 3,373 |  |  | 21 | % |  | $ | 2,896 |  |  | 21 | %
State income taxes, net of federal benefit | 216 |  |  | 1 | % |  | 222 |  |  | 1 | % |  | 199 |  |  | 2 | %
Non-U.S. tax effect, net of federal benefit | (588) |  |  | (3 | %) |  | (505) |  |  | (3 | %) |  | (483) |  |  | (4 | %)
Remeasurement of deferred tax balances | — |  |  | — | % |  | 1,007 |  |  | 6 | % |  | 329 |  |  | 2 | %
Conclusion of audits | — |  |  | — | % |  | (255) |  |  | (2 | %) |  | — |  |  | — | %
State tax apportionment position | (176) |  |  | (1 | %) |  | — |  |  | — | % |  | — |  |  | — | %
Other, net | (82) |  |  | — | % |  | (90) |  |  | — | % |  | (17) |  |  | — | %
Income tax provision | $ | 3,179 |  |  | 18 | % |  | $ | 3,752 |  |  | 23 | % |  | $ | 2,924 |  |  | 21 | %
In fiscal 2022 and fiscal 2021, the effective income tax rate was 18% and 23%, respectively. The effective tax rate in fiscal 2022 differs from the effective tax rate in fiscal 2021 primarily due to the following: •during fiscal 2022, a decrease in the state tax apportionment ratio, including a $176 million tax benefit related to prior years, as a result of a tax position taken related to a recent ruling; •during fiscal 2021, a $1.0 billion non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities as a result of the increase in UK tax rate from 19% to 25%, effective April 1, 2023; and •during fiscal 2021, $255 million of tax benefits recognized as a result of the conclusion of audits by taxing authorities. In fiscal 2021 and fiscal 2020, the effective income tax rate was 23% and 21%, respectively. The effective tax rate in fiscal 2021 differs from the effective tax rate in fiscal 2020 primarily due to the following: •during fiscal 2021, a $1.0 billion non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities, as discussed above; •during fiscal 2021, $255 million of tax benefits recognized as a result of the conclusion of audits by taxing authorities; and •during fiscal 2020, a $329 million non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities. Current income taxes receivable at September 30, 2022 and 2021 of $190 million and $83 million, respectively, were included in prepaid expenses and other current assets. Non-current income taxes receivable at September 30, 2022 and 2021 of $1.0 billion and $974 million, respectively, were included in other assets. Income taxes payable at September 30, 2022 and 2021 of $365 million and $325 million, respectively, were included in accrued liabilities. Accrued income taxes at September 30, 2022 and 2021 of $2.3 billion and $2.4 billion, respectively, were included in other liabilities. The Company’s operating hub in the Asia Pacific region is located in Singapore. Effective October 1, 2008 through September 30, 2023, it is subject to a tax incentive which is conditional upon meeting certain business operations and employment thresholds in Singapore. In fiscal 2022, 2021 and 2020, the tax incentive decreased Singapore tax by $362 million, $273 million and $280 million, and the gross benefit of the tax incentive on diluted earnings per share was $0.17, $0.12 and $0.13, respectively. 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, 2022, 2021 and 2020, the Company’s total gross unrecognized tax benefits were $2.7 billion, $2.5 billion and $2.6 billion, respectively, exclusive of interest and penalties described below. Included in the $2.7 billion, $2.5 billion and $2.6 billion are $1.3 billion, $1.3 billion and $1.6 billion 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:
| 2022 |  | 2021 |  | 2020
| (in millions)
Balance at beginning of period | $ | 2,488 |  |  | $ | 2,579 |  |  | $ | 2,234 |
Increases of unrecognized tax benefits related to prior years | 10 |  |  | 34 |  |  | 66 |
Decreases of unrecognized tax benefits related to prior years | (143) |  |  | (386) |  |  | (83) |
Increases of unrecognized tax benefits related to current year | 350 |  |  | 326 |  |  | 376 |
Decreases related to settlements with taxing authorities | (19) |  |  | (63) |  |  | (12) |
Reductions related to lapsing statute of limitations | (3) |  |  | (2) |  |  | (2) |
Balance at end of period | $ | 2,683 |  |  | $ | 2,488 |  |  | $ | 2,579 |
In fiscal 2022, 2021 and 2020, the Company recognized $15 million, $1 million and $68 million of net interest expense, respectively, related to uncertain tax positions. In fiscal 2022, the Company reversed accrued penalties of $31 million and in fiscal 2021 and 2020, the Company accrued penalties of $3 million and $4 million, respectively, related to uncertain tax positions. At September 30, 2022 and 2021, the Company had accrued interest of $238 million and $233 million, and accrued penalties of $3 million and $34 million, respectively, related to uncertain tax positions included in other long-term liabilities in its consolidated balance sheets. The Company’s U.S. federal income tax returns for fiscal 2013 through 2018 and refund claims filed for fiscal 2008 through 2012 are currently under examination. For fiscal 2008 through 2015, one unresolved issue related to an income tax deduction remains. During fiscal 2022, the Company completed the administrative appeals process for this issue without reaching a settlement with the Internal Revenue Service (IRS). The Company is currently evaluating its next steps. The Company’s California income tax returns for fiscal 2012 through 2015 and refund claims filed for fiscal 2006 through 2011 are currently under examination. Except for the refund claims, the federal and California statutes of limitations have expired for fiscal years prior to 2012. The India tax authorities completed the assessment of the Company’s income tax returns for the taxable years falling within the period from fiscal 2010 to 2019, and made certain adjustments. The Company objected to these adjustments and filed appeals to the appellate authorities. 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 2007. 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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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