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INCOME TAXES
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company’s income from continuing operations before income taxes includes the following components for the periods shown below (in millions):
Fiscal Years Ended September 30,
202420232022
United States$1,800 $1,413 $882 
Foreign415 303 245 
$2,215 $1,716 $1,127 
The Company’s income tax provision (benefit) on income from continuing operations consists of the following for the periods shown below (in millions):
 Fiscal Years Ended September 30,
 202420232022
Current
Federal$354 $276 $194 
State38 41 27 
Foreign98 97 62 
490 414 283 
Deferred
Federal(6)28 (17)
State7 11 (8)
Foreign9 (36)3 
10 3 (22)
$500 $417 $261 
A reconciliation of the federal statutory income tax rate to the effective income tax rate for the periods shown below is as follows:
 Fiscal Years Ended September 30,
 202420232022
Federal statutory income tax rate 21.0 %21.0 %21.0 %
Changes in valuation allowances impacting results4.0 %5.3 %5.5 %
State and local income taxes, net of federal benefit1.3 %1.7 %0.1 %
Federal deemed inclusion amounts0.5 %0.3 %1.5 %
Withholding taxes0.2 %0.2 %1.2 %
Provision to return adjustments0.1 %0.3 %(1.0)%
Foreign-derived intangible income(1.2)%(1.2)%(2.0)%
Stock-based compensation(3.6)%(2.3)%(2.8)%
Other—net0.3 %(1.0)%(0.3)%
Effective income tax rate22.6 %24.3 %23.2 %
The components of the deferred taxes consist of the following (in millions):
September 30, 2024September 30, 2023
Deferred tax assets (liabilities):
Intangible assets$(1,008)$(852)
Property, plant and equipment(101)(82)
Interest rate swaps, caps and collars(8)(47)
Interest expense limitation279 190 
Employee benefits115 103 
Inventories90 89 
Capitalized research and development costs73 52 
Net operating losses52 66 
Loss contract reserves33 36 
Environmental reserves10 10 
U.S. income tax credits7 25 
Product warranty reserves7 6 
Non-U.S. income tax credits3 9 
Other— (5)
Total(448)(400)
Add: Valuation allowance(318)(227)
Total net deferred tax assets (liabilities)$(766)$(627)
At September 30, 2024, the Company has state net operating loss carryforwards of approximately $816 million, German net operating loss carryforwards of $54 million and United Kingdom net operating loss carryforwards of approximately $65 million that expire in various fiscal years from 2025 to 2044. The Company has U.S. and non-U.S. tax credit carryforwards of $10 million that expire beginning in fiscal year 2025.
The deferred tax assets for the interest expense limitation, net operating losses, and tax credit carryforwards are reduced by a valuation allowance for the amount of such assets that the Company believes will not be realized.
With limited exception, no provision has been made for income taxes on undistributed earnings of foreign subsidiaries of approximately, $40 million at September 30, 2024, since it is the Company’s intention to indefinitely reinvest such undistributed earnings. The cash that is permanently reinvested is typically used to expand operations either organically or through acquisitions. It is not practicable to estimate the additional taxes that would be payable on the remittance of such earnings. We have provided for taxes in jurisdictions in which we are not considered indefinitely reinvested, however, such amounts are not significant.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2018. The Company is currently under examination for its federal income taxes in Canada for fiscal years 2013 through 2019, in France for fiscal years 2020 through 2022, and in Germany for fiscal years 2017 through 2019. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
20242023
Balance at October 1$17 $17 
Additions based on tax positions related to the prior year1 4 
Additions based on tax positions related to the current year— — 
Reductions based on tax positions related to the prior year— — 
Settlement with tax authorities(3)(3)
Lapse in statute of limitations(1)(1)
Balance at September 30$14 $17 
Unrecognized tax benefits at September 30, 2024 and 2023, the recognition of which would have an effect on the effective tax rate for each fiscal year, amounted to $14 million and $17 million, respectively. The Company classifies all income tax-related interest and penalties as income tax expense, which were not significant for the years ended September 30, 2024 and 2023. As of September 30, 2024 and 2023, the Company accrued $4 million and $6 million, respectively, for the potential payment of interest and penalties. Within the next twelve months, it is reasonably possible that unrecognized tax benefits could be reduced by approximately $2 million resulting from the resolution or closure of tax examinations. Any increase in the amount of unrecognized tax benefits within the next twelve months is not expected to be material.