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Income Taxes (Notes) | 12 Months Ended
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Sep. 30, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES For fiscal 2018 and 2017, the more significant components of the Company’s income tax provision from continuing operations are as follows (in millions):
| Year Ended September 30,
| 2018 |  | 2017
Tax expense at Ireland statutory rate | $ | 363 |  |  | $ | 320 |
U.S. state income tax, net of federal benefit | 24 |  |  | 23 |
Income subject to the U.S. federal tax rate | 16 |  |  | (188 | )
Income subject to rates different than the statutory rate | (164 | ) |  | 256 |
Reserve and valuation allowance adjustments | 31 |  |  | (164 | )
Impact of acquisitions and divestitures | 145 |  |  | 475 |
U.S. Tax Reform discrete items | 108 |  |  | — |
Restructuring and impairment costs | (5 | ) |  | (17 | )
Income tax provision | $ | 518 |  |  | $ | 705 |
The statutory tax rate in Ireland is being used as a comparison since the Company is domiciled in Ireland. The effective rate is above the statutory rate of 12.5% for fiscal 2018 primarily due to the discrete net impacts of U.S. Tax Reform, final income tax effects of the completed divestiture of the Scott Safety business, legal entity restructuring associated with the Power Solutions business, valuation allowance adjustments and tax rate differentials, partially offset by the benefits of continuing global tax planning initiatives, tax audit closures and tax benefits due to changes in entity tax status. The effective rate is above the statutory rate of 12.5% for fiscal 2017 primarily due to the establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries related to the divestiture of the Scott Safety business, the income tax effects of pension mark-to-market gains and tax rate differentials, partially offset by the jurisdictional mix of significant restructuring and impairment costs, Tyco Merger transaction and integration costs, purchase accounting adjustments, tax audit closures, a tax benefit due to changes in entity tax status and the benefits of continuing global tax planning initiatives. For fiscal 2016, the more significant components of the Company’s income tax provision from continuing operations are as follows (in millions):
| Year Ended September 30,
| 2016
Tax expense at U.S. federal statutory rate | $ | 371 |
State income taxes, net of federal benefit | (6 | )
Foreign income tax expense at different rates and foreign losses without tax benefits | (122 | )
U.S. tax on foreign income | (194 | )
U.S. credits and incentives | (14 | )
Impact of acquisitions and divestitures | 163 |
Restructuring and impairment costs | 28 |
Other | (29 | )
Income tax provision | $ | 197 |
The U.S. federal statutory tax rate is being used as a comparison since the Company was a U.S. domiciled company for 11 months of fiscal 2016. The effective rate is below the U.S. statutory rate for fiscal 2016 primarily due to the benefits of continuing global tax planning initiatives and foreign tax rate differentials, partially offset by the jurisdictional mix of restructuring and impairment costs, and the tax impacts of the Merger and integration related costs. Valuation Allowances The Company reviews the realizability of its deferred tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary. In the fourth quarter of fiscal 2018, the Company performed an analysis related to the realizability of its worldwide deferred tax assets. As a result, and after considering feasible tax planning initiatives and other positive and negative evidence, the Company determined that it was more likely than not that certain deferred tax assets primarily within Germany would not be realized. Therefore, the Company recorded $56 million of valuation allowances as income tax expense in the three month period ended September 30, 2018. In the fourth quarter of fiscal 2017, the Company performed an analysis related to the realizability of its worldwide deferred tax assets. As a result, and after considering tax planning initiatives and other positive and negative evidence, the Company determined that it was more likely than not that certain deferred tax assets primarily in Canada, China and Mexico would not be able to be realized, and it was more likely than not that certain deferred tax assets in Germany would be realized. Therefore, the Company recorded $27 million of net valuation allowances as income tax expense in the three month period ended September 30, 2017. As a result of the Tyco Merger in the fourth quarter of fiscal 2016, the Company recorded as part of the acquired liabilities of Tyco $2.4 billion of valuation allowances. Also in the fourth quarter of fiscal 2016, the Company performed an analysis related to the realizability of its worldwide deferred tax assets. As a result, and after considering tax planning initiatives and other positive and negative evidence, the Company determined that no other material changes were needed to its valuation allowances. Therefore, there was no impact to income tax expense due to valuation allowance changes in the three month period or year ended September 30, 2016. Uncertain Tax Positions The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Judgment is required in determining its worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities. At September 30, 2018, the Company had gross tax effected unrecognized tax benefits for continuing operations of $2,379 million of which $2,246 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2018 was approximately $119 million (net of tax benefit). At September 30, 2017, the Company had gross tax effected unrecognized tax benefits for continuing operations of $2,173 million of which $2,047 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2017 was approximately $99 million (net of tax benefit). At September 30, 2016, the Company had gross tax effected unrecognized tax benefits for continuing operations of $1,706 million of which $1,604 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2016 was approximately $84 million (net of tax benefit). A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| Year Ended September 30,
| 2018 |  | 2017 |  | 2016
Beginning balance, October 1 | $ | 2,173 |  |  | $ | 1,706 |  |  | $ | 1,052 |
Additions for tax positions related to the current year | 444 |  |  | 613 |  |  | 442 |
Additions for tax positions of prior years | 7 |  |  | 116 |  |  | 15 |
Reductions for tax positions of prior years | (201 | ) |  | (44 | ) |  | (66 | )
Settlements with taxing authorities | (19 | ) |  | (95 | ) |  | (104 | )
Statute closings and audit resolutions | (25 | ) |  | (264 | ) |  | (30 | )
Acquisition of business | — |  |  | 141 |  |  | 397 |
Ending balance, September 30 | $ | 2,379 |  |  | $ | 2,173 |  |  | $ | 1,706 |
During fiscal 2018, the Company settled tax examinations impacting fiscal years 2010 to fiscal 2012 which resulted in a $25 million net benefit to income tax expense. During fiscal 2017, the Company settled a significant number of tax examinations impacting fiscal years 2006 to fiscal 2014. In the fourth quarter of fiscal 2017, income tax audit resolutions resulted in a net $191 million benefit to income tax expense. In the U.S., fiscal years 2015 through 2016 are currently under exam by the Internal Revenue Service ("IRS") for certain legal entities. Additionally, the Company is currently under exam in the following major non-U.S. jurisdictions for continuing operations:
Tax Jurisdiction |  | Tax Years Covered
Belgium |  | 2015 - 2017
China |  | 2008 - 2016
France |  | 2010 - 2012; 2015-2016
Germany |  | 2007 - 2016
Spain |  | 2010 - 2012
United Kingdom |  | 2012 - 2015
It is reasonably possible that certain tax examinations and/or tax litigation will conclude within the next twelve months, which could have a material impact to tax expense. Other Tax Matters In the fourth quarter of fiscal 2018, the Company recorded a tax benefit of $139 million due to changes in entity tax status. In the fourth quarter of fiscal 2018, the Company recorded a tax charge of $129 million due to legal entity restructuring associated with the Power Solutions business. In the first quarter of fiscal 2018, the Company completed the sale of its Scott Safety business to 3M Company. In connection with the sale, the Company recorded a pre-tax gain of $114 million and income tax expense of $30 million. In addition, during fiscal 2017, the Company recorded a discrete non-cash tax charge of $490 million related to establishment of a deferred tax liability on the outside basis difference of the Company's investment in certain subsidiaries of the Scott Safety business. Refer to Note 3, "Acquisitions and Divestitures," and Note 4, "Discontinued Operations," of the notes to consolidated financial statements for additional information. During fiscal 2018 and 2017, the Company recorded transaction and integration costs of $234 million and $428 million, respectively. These costs generated tax benefits of $27 million and $69 million, respectively, which reflects the Company’s current tax position in these jurisdictions. During fiscal 2018, 2017 and 2016, the Company incurred significant charges for restructuring and impairment costs of $263 million, $367 million and $288 million, respectively. Refer to Note 16, "Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. These costs generated tax benefits of $38 million, $63 million and $76 million, respectively, which reflects the Company’s current tax position in these jurisdictions. During fiscal 2018, 2017 and 2016, the Company recorded pension mark-to-market gains (losses) of $10 million, $420 million and $(393) million, respectively. These gains generated tax expense (benefit) of $(3) million, $126 million and $(119) million, respectively, which reflects the Company’s current tax position in these jurisdictions. In the fourth quarter of fiscal 2017, the Company recorded a tax charge of $53 million due to a change in the deferred tax liability related to the outside basis of certain nonconsolidated subsidiaries. In the first quarter of fiscal 2017, the Company recorded a discrete tax benefit of $101 million due to changes in entity tax status. During the fourth quarter of fiscal 2016, the Company completed its Merger with Tyco. As a result of that transaction, the Company incurred incremental tax expense of $137 million. In preparation for the spin-off of the Automotive Experience business in the first quarter of fiscal 2017, the Company incurred incremental tax expense for continuing operations of $26 million in fiscal 2016. As a result of the Tyco Merger in the fourth quarter of fiscal 2016, the Company recorded as part of the acquired liabilities of Tyco $290 million of post sale contingent tax indemnification liabilities which is generally recorded within other noncurrent liabilities in the consolidated statements of financial position. The liabilities are recorded at fair value and relate to certain tax related matters borne by the buyer of previously divested subsidiaries of Tyco which Tyco has indemnified certain parties and the amounts are probable of being paid. At September 30, 2018 and 2017, the Company recorded liabilities of $255 million and $290 million, respectively. Of the $255 million recorded as of September 30, 2018, $235 million is related to prior divested businesses and the remainder relates to Tyco’s tax sharing agreements from its 2007 and 2012 spin-off transactions. These are certain guarantees or indemnifications extended among Tyco, Medtronic, TE Connectivity, ADT and Pentair in accordance with the terms of the 2007 and 2012 separation and tax sharing agreements. Impacts of Tax Legislation and Change in Statutory Tax Rates On December 22, 2017, the “Tax Cuts and Jobs Act” (H.R. 1) was enacted and significantly revises U.S. corporate income tax by, among other things, lowering corporate income tax rates, imposing a one-time transition tax on deemed repatriated earnings of non-U.S. subsidiaries, and implementing a territorial tax system and various base erosion minimum tax provisions. In connection with the Company’s analysis of the impact of the U.S. tax law changes, which is provisional and subject to change, the Company recorded a net tax charge of $108 million during fiscal 2018. This provisional net tax charge arises from a benefit of $108 million due to the remeasurement of U.S. deferred tax assets and liabilities, offset by the Company’s tax charge relating to the one-time transition tax on deemed repatriated earnings, inclusive of all relevant taxes, of $216 million. The Company’s estimated benefit of the remeasurement of U.S. deferred tax assets and liabilities increased from $101 million as of December 31, 2017 to $108 million as of September 30, 2018 due to calculation refinement of the Company’s estimated impact. The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The Company’s tax charge for transition tax decreased from $305 million as of December 31, 2017 to $216 million as of September 30, 2018 due to further analysis of the Company’s post-1986 non-U.S. earnings and profits (“E&P”) previously deferred from U.S. federal taxation and refinement of the estimated impact of tax law changes. Based on the effective dates of certain aspects of the U.S. tax law changes, various applicable impacts of the enacted legislation could not be finalized as of September 30, 2018. While the Company made reasonable estimates of the impact of the transition tax, the final impact of the U.S. tax law changes may differ from these estimated impacts, due to, future treasury regulations, tax law technical corrections, notices, rulings, refined computations, and other items. The Company will finalize such provisional amounts within the time period prescribed by Staff Accounting Bulletin 118. During the fiscal years ended 2018, 2017 and 2016, other tax legislation was adopted in various jurisdictions. These law changes did not have a material impact on the Company's consolidated financial statements. Continuing Operations Components of the provision for income taxes on continuing operations were as follows (in millions):
| Year Ended September 30,
| 2018 |  | 2017 |  | 2016
Current |  |  |  |  |
U.S. federal | $ | 515 |  |  | $ | (225 | ) |  | $ | 169 |
U.S. state | 34 |  |  | (6 | ) |  | 5 |
Non-U.S. | 605 |  |  | 373 |  |  | 788 |
| 1,154 |  |  | 142 |  |  | 962 |
Deferred |  |  |  |  |
U.S. federal | (284 | ) |  | 593 |  |  | (321 | )
U.S. state | (11 | ) |  | 41 |  |  | (15 | )
Non-U.S. | (341 | ) |  | (71 | ) |  | (429 | )
| (636 | ) |  | 563 |  |  | (765 | )
Income tax provision | $ | 518 |  |  | $ | 705 |  |  | $ | 197 |
Consolidated U.S. income from continuing operations before income taxes and noncontrolling interests for the fiscal years ended September 30, 2018, 2017 and 2016 was income of $773 million, $868 million and $943 million, respectively. Consolidated non-U.S. income from continuing operations before income taxes and noncontrolling interests for the fiscal years ended September 30, 2018, 2017 and 2016 was income of $2,128 million, $1,690 million and $119 million, respectively. Income taxes paid for the fiscal years ended September 30, 2018, 2017 and 2016 were $517 million, $1,756 million and $1,388 million, respectively. At September 30, 2018 and 2017, the Company recorded within the consolidated statements of financial position in other current liabilities approximately $336 million and $625 million, respectively, of accrued income tax liabilities. The Company has not provided U.S. or non-U.S. income taxes on approximately $19.5 billion of outside basis differences of consolidated subsidiaries of Johnson Controls International plc. The Company is indefinitely reinvested in these basis differences. The reduction of the outside basis differences via the sale or liquidation of these subsidiaries and/or distributions could create taxable income. The Company's intent is to reduce the outside basis differences only when it would be tax efficient. Given the numerous ways in which the basis differences may be reduced, it is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on the outside basis differences. In fiscal 2018, due to U.S. Tax Reform, the Company provided income tax related to the change in the Company’s assertion over the outside basis difference of certain non-U.S. subsidiaries owned directly or indirectly by U.S. subsidiaries. Under U.S. Tax Reform, the U.S. has enacted a tax system that provides an exemption for dividends received by U.S. corporations from 10% or more owned non-U.S. corporations. However, certain non-U.S, U.S. state and withholding taxes may still apply when closing an outside basis difference via distribution or other transactions. Deferred taxes were classified in the consolidated statements of financial position as follows (in millions):
| September 30,
| 2018 |  | 2017
Other noncurrent assets | 1,591 |  |  | 2,360 |
Other noncurrent liabilities | (763 | ) |  | (1,733 | )
Net deferred tax asset | $ | 828 |  |  | $ | 627 |
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities included (in millions):
| September 30,
| 2018 |  | 2017
Deferred tax assets |  |  |
Accrued expenses and reserves | $ | 490 |  |  | $ | 891 |
Employee and retiree benefits | 193 |  |  | 373 |
Net operating loss and other credit carryforwards | 6,510 |  |  | 5,130 |
Research and development | 93 |  |  | 188 |
Other, net | — |  |  | 26 |
| 7,286 |  |  | 6,608 |
Valuation allowances | (5,195 | ) |  | (3,838 | )
| 2,091 |  |  | 2,770 |
Deferred tax liabilities |  |  |
Property, plant and equipment | 172 |  |  | 247 |
Subsidiaries, joint ventures and partnerships | 306 |  |  | 789 |
Intangible assets | 713 |  |  | 1,107 |
Other, net | 72 |  |  | — |
| 1,263 |  |  | 2,143 |
Net deferred tax asset | $ | 828 |  |  | $ | 627 |
At September 30, 2018, the Company had available net operating loss carryforwards of approximately $24.3 billion, of which $13.5 billion will expire at various dates between 2019 and 2038, and the remainder has an indefinite carryforward period. The Company had available U.S. foreign tax credit carryforwards at September 30, 2018 of $624 million which may be carried back to fiscal period 2016 or which will otherwise expire at various dates between 2020 and 2024. The valuation allowance, generally, is for loss carryforwards for which realization is uncertain because it is unlikely that the losses will be realized given the lack of sustained profitability and/or limited carryforward periods in certain countries. During the first quarter of 2018, the Company adopted ASU 2016-09. As a result, the Company recognized deferred tax assets of $179 million in the consolidated statements of financial position related to certain operating loss carryforwards resulting from the exercise of employee stock options and restricted stock vestings on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of October 1, 2017.

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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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