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Income Taxes | 12 Months Ended
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Sep. 30, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 19—Income Taxes The Company’s income before income taxes by fiscal year consisted of the following:
| For the Years Ended September 30,
| 2023 |  | 2022 |  | 2021
| (in millions)
U.S. | $ | 13,339 |  |  | $ | 11,051 |  |  | $ | 11,002 |
Non-U.S. | 7,698 |  |  | 7,085 |  |  | 5,061 |
Total income before income taxes | $ | 21,037 |  |  | $ | 18,136 |  |  | $ | 16,063 |
For fiscal 2023, 2022 and 2021, U.S. income before income taxes included $4.2 billion, $3.6 billion, and $3.1 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,
| 2023 |  | 2022 |  | 2021
| (in millions)
Current: |  |  |  |  |
U.S. federal | $ | 2,630 |  |  | $ | 2,166 |  |  | $ | 1,943 |
State and local | 293 |  |  | 104 |  |  | 69 |
Non-U.S. | 1,324 |  |  | 1,245 |  |  | 869 |
Total current taxes | 4,247 |  |  | 3,515 |  |  | 2,881 |
Deferred: |  |  |  |  |
U.S. federal | (339) |  |  | (231) |  |  | (57) |
State and local | (1) |  |  | (77) |  |  | (28) |
Non-U.S. | (143) |  |  | (28) |  |  | 956 |
Total deferred taxes | (483) |  |  | (336) |  |  | 871 |
Total income tax provision | $ | 3,764 |  |  | $ | 3,179 |  |  | $ | 3,752 |
The following table presents the components of deferred tax assets and liabilities:
| September 30,
| 2023 |  | 2022
| (in millions)
Deferred Tax Assets: |  |  |
Accrued compensation and benefits | $ | 212 |  |  | $ | 172 |
Accrued litigation obligation | 365 |  |  | 331 |
Client incentives | 630 |  |  | 442 |
Net operating loss carryforwards | 232 |  |  | 117 |
Comprehensive loss | 72 |  |  | 21 |
Federal benefit of state taxes | 125 |  |  | 133 |
Other | 66 |  |  | 71 |
Valuation allowance | (149) |  |  | (120) |
Deferred tax assets | 1,553 |  |  | 1,167 |
Deferred Tax Liabilities: |  |  |
Property, equipment and technology, net | (350) |  |  | (450) |
Intangible assets | (6,063) |  |  | (5,788) |
Unrealized gains on equity securities | (103) |  |  | (124) |
Foreign taxes | (25) |  |  | (50) |
Deferred tax liabilities | (6,541) |  |  | (6,412) |
Net deferred tax liabilities | $ | (4,988) |  |  | $ | (5,245) |
As of September 30, 2023 and 2022, net deferred tax assets of $126 million and $87 million, respectively, were 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 2023 and 2022 valuation allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years. As of September 30, 2023, the Company had $1.0 billion of foreign net operating loss carryforwards, which may be carried forward indefinitely. The following table presents a reconciliation of the income tax provision to the amount of income tax determined by applying the U.S. federal statutory income tax rate to income before income taxes:
| For the Years Ended September 30,
| 2023 |  | 2022 |  | 2021
| (in millions, except percentages)
U.S. federal income tax at statutory rate | $ | 4,418 |  |  | 21 | % |  | $ | 3,809 |  |  | 21 | % |  | $ | 3,373 |  |  | 21 | %
State income taxes, net of federal benefit | 245 |  |  | 1 | % |  | 216 |  |  | 1 | % |  | 222 |  |  | 1 | %
Non-U.S. tax effect, net of federal benefit | (758) |  |  | (3 | %) |  | (588) |  |  | (3 | %) |  | (505) |  |  | (3 | %)
Remeasurement of deferred tax balances | — |  |  | — | % |  | — |  |  | — | % |  | 1,007 |  |  | 6 | %
Reassessment of an uncertain tax position | (142) |  |  | (1 | %) |  | — |  |  | — | % |  | — |  |  | — | %
Conclusion of audits | — |  |  | — | % |  | — |  |  | — | % |  | (255) |  |  | (2 | %)
State tax apportionment position | — |  |  | — | % |  | (176) |  |  | (1 | %) |  | — |  |  | — | %
Other, net | 1 |  |  | — | % |  | (82) |  |  | — | % |  | (90) |  |  | — | %
Income tax provision | $ | 3,764 |  |  | 18 | % |  | $ | 3,179 |  |  | 18 | % |  | $ | 3,752 |  |  | 23 | %
In fiscal 2023 and fiscal 2022, the effective income tax rates were 18% including the following: •during fiscal 2023, a $142 million tax benefit related to prior years due to the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination; and •during fiscal 2022, a $176 million tax benefit related to prior years due to a decrease in the state apportionment ratio as a result of a tax position taken related to a ruling. In fiscal 2022 and fiscal 2021, the effective income tax rates were 18% and 23%, respectively. The effective income tax rate in fiscal 2022 differs from the effective income tax rate in fiscal 2021 primarily due to the following: •during fiscal 2022, a $176 million tax benefit related to prior years due to a decrease in the state apportionment ratio as a result of a tax position taken related to a 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. As of September 30, 2023 and 2022, current income taxes receivable of $206 million and $190 million, respectively, were included in prepaid expenses and other current assets; non-current income taxes receivable of $961 million and $1.0 billion, respectively, were included in other assets; income taxes payable of $1.5 billion and $365 million, respectively, were included in accrued liabilities; and accrued income taxes of $1.9 billion and $2.3 billion, respectively, were included in other liabilities on the consolidated balance sheets. The Company’s operating hub in the Asia Pacific region is located in Singapore. It was subject to a tax incentive, effective October 1, 2008 through September 30, 2023, conditional upon meeting certain business operations and employment thresholds in Singapore. In fiscal 2023, 2022 and 2021, the tax incentive decreased Singapore tax by $468 million, $362 million and $273 million, and the gross benefit of the tax incentive on diluted earnings per share was $0.22, $0.17 and $0.12, 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. As of September 30, 2023, 2022 and 2021, the Company’s total gross unrecognized tax benefits were $3.5 billion, $2.7 billion and $2.5 billion, respectively, exclusive of interest and penalties described below. Included in the $3.5 billion, $2.7 billion and $2.5 billion are $1.6 billion, $1.3 billion and $1.3 billion of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period. The following table presents a reconciliation of beginning and ending unrecognized tax benefits by fiscal year:
| 2023 |  | 2022 |  | 2021
| (in millions)
Balance as of beginning of period | $ | 2,683 |  |  | $ | 2,488 |  |  | $ | 2,579 |
Increase in unrecognized tax benefits related to prior years | 515 |  |  | 10 |  |  | 34 |
Decrease in unrecognized tax benefits related to prior years | (190) |  |  | (143) |  |  | (386) |
Increase in unrecognized tax benefits related to current year | 510 |  |  | 350 |  |  | 326 |
Decrease related to settlements with taxing authorities | (17) |  |  | (19) |  |  | (63) |
Reduction related to lapsing statute of limitations | (4) |  |  | (3) |  |  | (2) |
Balance as of end of period | $ | 3,497 |  |  | $ | 2,683 |  |  | $ | 2,488 |
The increases in unrecognized tax benefits include refund claims filed during the year, an increase in gross timing differences, and various tax positions across several jurisdictions. The decrease in unrecognized tax benefits primarily includes the reassessment of an uncertain tax position as a result of new information obtained during an ongoing tax examination, as mentioned above. In fiscal 2023, 2022 and 2021, the Company recognized $34 million, $15 million and $1 million of net interest expense, respectively, related to uncertain tax positions. In fiscal 2023 and 2021, the Company accrued no significant penalties and in fiscal 2022, the Company reversed accrued penalties of $31 million related to uncertain tax positions. As of September 30, 2023 and 2022, the Company had accrued interest of $271 million and $238 million, respectively, and no significant accrued penalties related to uncertain tax positions. The Company’s U.S. federal income tax returns for fiscal 2016 through 2018 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. The Company is evaluating its next steps. Except for the unresolved issue, the federal statute of limitations has expired for fiscal years prior to 2016. The Company’s California income tax returns for fiscal 2012 through 2015 are currently under examination and refund claims filed for fiscal 2006 through 2011 are currently under administrative appeal. Except for the refund claims, the California statute of limitations has 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 2021 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. However, it is reasonably possible that the Company’s net unrecognized tax benefits could decrease by approximately $400 million in the next 12 months.

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