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INCOME TAXES
 12 Months Ended
Sep. 30, 2025
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,
202520242023
United States$2,119 $1,800 $1,413 
Foreign510 415 303 
$2,629 $2,215 $1,716 
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,
 202520242023
Current
Federal$420 $354 $276 
State45 38 41 
Foreign100 98 97 
565 490 414 
Deferred
Federal(32)(6)28 
State1 7 11 
Foreign21 9 (36)
(10)10 3 
$555 $500 $417 
A reconciliation of the federal statutory income tax rate to the effective income tax rate for the periods shown below is as follows:
 Fiscal Years Ended September 30,
 202520242023
Federal statutory income tax rate 21.0 %21.0 %21.0 %
Changes in valuation allowances impacting results3.7 %4.0 %5.3 %
State and local income taxes, net of federal benefit0.9 %1.3 %1.7 %
Foreign-derived intangible income(1.6)%(1.2)%(1.2)%
Stock-based compensation(2.9)%(3.6)%(2.3)%
Other—net— %1.1 %(0.2)%
Effective income tax rate21.1 %22.6 %24.3 %
The components of the deferred taxes consist of the following (in millions):
September 30, 2025September 30, 2024
Deferred tax assets (liabilities):
Intangible assets$(1,012)$(1,008)
Property, plant and equipment(99)(101)
Interest expense limitation419 279 
Employee benefits131 115 
Inventories99 90 
Capitalized research and development costs86 73 
Net operating losses59 52 
Other14 52 
Total(303)(448)
Add: Valuation allowance(456)(318)
Total net deferred tax assets (liabilities)$(759)$(766)
At September 30, 2025, the Company has state net operating loss carryforwards of approximately $780 million, German net operating loss carryforwards of $66 million and United Kingdom net operating loss carryforwards of approximately $93 million that expire in various fiscal years from 2026 to 2045. The Company has U.S. and non-U.S. tax credit carryforwards of $9 million that expire beginning in fiscal year 2026.
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 $30 million at September 30, 2025, 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):
20252024
Balance at October 1$14 $17 
Additions based on tax positions related to the prior year7 1 
Additions based on tax positions related to the current year2 — 
Reductions based on tax positions related to the prior year— — 
Settlement with tax authorities— (3)
Lapse in statute of limitations— (1)
Balance at September 30$23 $14 
Unrecognized tax benefits at September 30, 2025 and 2024, the recognition of which would have an effect on the effective tax rate for each fiscal year, amounted to $23 million and $14 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, 2025 and 2024. As of September 30, 2025 and 2024, the Company accrued $5 million and $4 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.
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act (the “Act”) was signed into law. It contains a broad range of tax reform provisions affecting businesses. The majority of these provisions will impact us starting in fiscal year 2027. We continue to evaluate the future effects of the Act on our effective tax rate and cash tax position. The impact of the legislation on our operating results for the year ended September 30, 2025 was not material.