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Income Taxes (Notes) | 12 Months Ended
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Sep. 30, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The more significant components of the Company’s income tax provision from continuing operations are as follows (in millions):
| Year Ended September 30,
| 2019 |  | 2018 |  | 2017
Tax expense at Ireland statutory rate | $ | 132 |  |  | $ | 193 |  |  | $ | 144 |
U.S. state income tax, net of federal benefit | 15 |  |  | 15 |  |  | 8 |
Income subject to the U.S. federal tax rate | (110 | ) |  | 39 |  |  | (311 | )
Income subject to rates different than the statutory rate | 38 |  |  | (201 | ) |  | 185 |
Reserve and valuation allowance adjustments | (284 | ) |  | 31 |  |  | (164 | )
Impact of acquisitions and divestitures | — |  |  | 16 |  |  | 475 |
U.S. Tax Reform discrete items | — |  |  | 108 |  |  | — |
Restructuring and impairment costs | (24 | ) |  | (4 | ) |  | (15 | )
Income tax provision (benefit) | $ | (233 | ) |  | $ | 197 |  |  | $ | 322 |
The statutory tax rate in Ireland is being used as a comparison since the Company is domiciled in Ireland. The effective rate for continuing operations is below the statutory rate of 12.5% for fiscal 2019 primarily due to tax audit reserve adjustments, the income tax effects of mark-to-market adjustments, a tax indemnification reserve release, the tax benefits of an asset held for sale impairment charge and continuing global tax planning initiatives, partially offset by valuation allowance adjustments as a result of tax law changes, a discrete tax charge related to newly enacted regulations related to U.S. Tax Reform and tax rate differentials. The effective rate for continuing operations is above the statutory rate of 12.5% for fiscal 2018 primarily due to the discrete net impacts of U.S. Tax Reform, the final income tax effects of the completed divestiture of the Scott Safety business, and valuation allowance adjustments, partially offset by tax audit closures, tax benefits due to changes in entity tax status, the benefits of continuing global tax planning initiatives and tax rate differentials. 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 mark-to-market adjustments 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. 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 2019, the Company performed an analysis related to the realizablility 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 the U.S., Belgium, Japan and the United Kingdom would not be realized, and it is more likely than not that certain deferred tax assets of the U.S. and France will be realized. The valuation allowance adjustments resulted in an immaterial net impact to income tax expense for the three-month period ended September 30, 2019. In the first quarter of fiscal 2019, as a result of changes to U.S. tax law, the Company recorded a discrete tax charge of $76 million related to valuation allowances on certain U.S. deferred tax assets. 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. 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, 2019, the Company had gross tax effected unrecognized tax benefits for continuing operations of $2,451 million of which $2,121 million, if recognized, would impact the effective tax rate. Total net accrued interest at September 30, 2019 was approximately $181 million (net of tax benefit). At September 30, 2018, the Company had gross tax effected unrecognized tax benefits for continuing operations of $2,358 million of which $2,225 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 $2,161 million of which $2,034 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). A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| Year Ended September 30,
| 2019 |  | 2018 |  | 2017
Beginning balance, October 1 | $ | 2,358 |  |  | $ | 2,161 |  |  | $ | 1,694 |
Additions for tax positions related to the current year | 433 |  |  | 435 |  |  | 613 |
Additions for tax positions of prior years | 347 |  |  | 7 |  |  | 116 |
Reductions for tax positions of prior years | (88 | ) |  | (201 | ) |  | (44 | )
Settlements with taxing authorities | — |  |  | (19 | ) |  | (95 | )
Statute closings and audit resolutions | (599 | ) |  | (25 | ) |  | (264 | )
Acquisition of business | — |  |  | — |  |  | 141 |
Ending balance, September 30 | $ | 2,451 |  |  | $ | 2,358 |  |  | $ | 2,161 |
During fiscal 2019, the Company settled tax examinations impacting fiscal years 2015 to 2016 and adjusted various tax audit reserves which resulted in a $586 million net benefit to income tax expense in the fourth quarter. In the third quarter of fiscal 2019, the Company recorded a discrete charge related to newly enacted regulations related to U.S. Tax Reform and a discrete charge related to non-U.S. tax examinations which impacted the Company’s reserves for uncertain tax positions resulting in a $226 million net charge to income tax expense. 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. 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 - 2018
Germany |  | 2007 - 2016
Japan |  | 2015 - 2018
Spain |  | 2015
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 third quarter of fiscal 2019, the Company recorded a $235 million impairment charge related to assets held for sale. Refer to Note 17, "Impairment of Long-Lived Assets," of the notes to consolidated financial statements for further information regarding the impairment charge. The impairment charge generated a $53 million tax benefit. In the third quarter of fiscal 2019, the Company released a $226 million tax indemnification reserve, which was recorded within selling, general and administrative expenses in the consolidated statements of income. Refer to Note 21, "Guarantees," of the notes to consolidated financial statements for further information regarding the reserve release. The reserve release generated no income tax expense. During fiscal 2019, 2018, and 2017, the Company recorded transaction and integration costs for continuing operations of $317 million, $226 million and $427 million, respectively. These costs generated tax benefits of $35 million, $27 million and $69 million, respectively, which reflects the Company’s current tax position in these jurisdictions. During fiscal 2019, 2018 and 2017, the Company recorded mark-to-market gains (losses) of $(618) million, $24 million and $384 million, respectively. These gains (losses) generated tax expense (benefit) of $(130) million, $1 million and $113 million, respectively, which reflects the Company’s current tax position in these jurisdictions. 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 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 2, "Acquisitions and Divestitures," of the notes to consolidated financial statements for additional information. During fiscal 2018 and 2017, the Company incurred significant charges for restructuring and impairment costs for continuing operations of $255 million and $347 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 $36 million and $58 million, respectively, which reflects the Company’s current tax position in these jurisdictions. In the third quarter of fiscal 2017, the Company recorded a discrete tax benefit of $75 million due to changes in entity tax status. In the first quarter of fiscal 2017, the Company recorded a discrete tax benefit of $101 million due to changes in entity tax status. Impacts of Tax Legislation and Change in Statutory Tax Rates On September 28, 2018 the Swiss Parliament approved the Federal Act on Tax Reform and AHV Financing (“TRAF”), which was subsequently approved by the Swiss electorate on May 19, 2019. During the fourth quarter of fiscal 2019, the Swiss Federal Council enacted TRAF which becomes effective for the Company on January 1, 2020. The impacts of the federal enactment did not have a material impact to the Company’s financial statements. TRAF also provides for parameters which enable the Swiss cantons to adjust tax rates and establish new regulations for companies. As of September 30, 2019, the canton of Schaffhausen had not concluded its public referendum; however, the enactment did take place in October 2019. The Company is still evaluating the impact on the deferred tax assets in the canton of Schaffhausen and the revaluation of these assets could have a noncash impact of less than $100 million to the Company’s financial statements. On December 22, 2017, the “Tax Cuts and Jobs Act” (H.R. 1) was enacted and significantly revised 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, the Company recorded a provisional net tax charge of $108 million during fiscal 2018 consistent with guidance prescribed by Staff Accounting Bulletin 118. 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, which is generally 21% or the blended fiscal 2018 rate of 24.5%. 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. During fiscal 2019, the Company completed its analysis of all enactment-date income tax effects of the U.S. tax law change with no further adjustment to the provisional amounts recorded as of September 30, 2018. During the fiscal years ended 2019, 2018 and 2017, 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 (benefit) for income taxes on continuing operations were as follows (in millions):
| Year Ended September 30,
| 2019 |  | 2018 |  | 2017
Current |  |  |  |  |
U.S. federal | $ | (1,025 | ) |  | $ | 476 |  |  | $ | (286 | )
U.S. state | (33 | ) |  | 26 |  |  | (18 | )
Non-U.S. | 213 |  |  | 434 |  |  | 53 |
| (845 | ) |  | 936 |  |  | (251 | )
Deferred |  |  |  |  |
U.S. federal | 412 |  |  | (372 | ) |  | 523 |
U.S. state | 84 |  |  | (10 | ) |  | 33 |
Non-U.S. | 116 |  |  | (357 | ) |  | 17 |
| 612 |  |  | (739 | ) |  | 573 |
Income tax provision (benefit) | $ | (233 | ) |  | $ | 197 |  |  | $ | 322 |
Consolidated U.S. income (loss) from continuing operations before income taxes and noncontrolling interests for the fiscal years ended September 30, 2019, 2018 and 2017 was income (loss) of $(259) million, $261 million and $335 million, respectively. Consolidated non-U.S. income from continuing operations before income taxes and noncontrolling interests for the fiscal years ended September 30, 2019, 2018 and 2017 was income of $1,315 million, $1,285 million and $816 million, respectively. Continuing operations income taxes paid for the fiscal years ended September 30, 2019, 2018 and 2017 were $377 million, $81 million and $497 million, respectively. At September 30, 2019 and 2018, the Company recorded within the continuing operations consolidated statements of financial position in other current assets approximately $1,069 million and $257 million, respectively, of income tax assets. At September 30, 2019 and 2018, the Company recorded within the continuing operations consolidated statements of financial position in other current liabilities approximately $159 million and $336 million, respectively, of accrued income tax liabilities. The Company has not provided U.S. or non-U.S. income taxes on approximately $20.1 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. Deferred taxes were classified in the consolidated statements of financial position as follows (in millions):
| September 30,
| 2019 |  | 2018
Other noncurrent assets | 552 |  |  | 1,265 |
Other noncurrent liabilities | (588 | ) |  | (727 | )
Net deferred tax asset (liability) | $ | (36 | ) |  | $ | 538 |
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities included (in millions):
| September 30,
| 2019 |  | 2018
Deferred tax assets |  |  |
Accrued expenses and reserves | $ | 437 |  |  | $ | 458 |
Employee and retiree benefits | 265 |  |  | 178 |
Net operating loss and other credit carryforwards | 5,664 |  |  | 6,350 |
Research and development | 106 |  |  | 93 |
| 6,472 |  |  | 7,079 |
Valuation allowances | (5,068 | ) |  | (5,088 | )
| 1,404 |  |  | 1,991 |
Deferred tax liabilities |  |  |
Property, plant and equipment | 139 |  |  | 179 |
Subsidiaries, joint ventures and partnerships | 499 |  |  | 283 |
Intangible assets | 759 |  |  | 915 |
Other, net | 43 |  |  | 76 |
| 1,440 |  |  | 1,453 |
Net deferred tax asset (liability) | $ | (36 | ) |  | $ | 538 |
At September 30, 2019, the Company had available net operating loss carryforwards of approximately $23.3 billion, of which $13.8 billion will expire at various dates between 2020 and 2039, and the remainder has an indefinite carryforward period. The Company had available U.S. foreign tax credit carryforwards at September 30, 2019 of $35 million which will expire in 2029. The valuation allowance, generally, is for loss and credit carryforwards for which realization is uncertain because it is unlikely that the losses and/or credits 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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