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Income Taxes | 12 Months Ended
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Sep. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Provision for Income Taxes The provision (benefit) for income taxes for the years ended September 30 consisted of:
(Millions of dollars) | 2025 |  | 2024 |  | 2023
Current: |  |  |  |  |
Federal | $ | 152 |  |  | $ | 132 |  |  | $ | 364 |
State and local, including Puerto Rico | 55 |  |  | 17 |  |  | 87 |
Foreign | 471 |  |  | 362 |  |  | 303 |
| $ | 677 |  |  | $ | 511 |  |  | $ | 754 |
Deferred: |  |  |  |  |
Domestic | $ | (343) |  |  | $ | (169) |  |  | $ | (644) |
Foreign | (131) |  |  | (42) |  |  | 22 |
| (474) |  |  | (211) |  |  | (622) |
Income tax provision | $ | 203 |  |  | $ | 300 |  |  | $ | 132 |
The components of Income from Continuing Operations Before Income Taxes for the years ended September 30 consisted of:
(Millions of dollars) | 2025 |  | 2024 |  | 2023
Domestic, including Puerto Rico | $ | (11) |  |  | $ | 336 |  |  | $ | 358 |
Foreign | 1,892 |  |  | 1,669 |  |  | 1,304 |
Income from Continuing Operations Before Income Taxes | $ | 1,881 |  |  | $ | 2,005 |  |  | $ | 1,662 |
Unrecognized Tax Benefits The table below summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled. The Company believes it is reasonably possible that the amount of unrecognized benefits will change during the next twelve months due to one or more of the following events: expiring statutes, audit activity, tax payments, other activity, or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate. However, the Company does not expect changes to have a significant effect on its results of operations, financial condition, or cash flows.
(Millions of dollars) | 2025 |  | 2024 |  | 2023
Balance at October 1 | $ | 221 |  |  | $ | 269 |  |  | $ | 267 |
Increase due to current year tax positions | 40 |  |  | 22 |  |  | 22 |
Increase due to prior year tax positions | 5 |  |  | — |  |  | 33 |
Decreases due to prior year tax positions | — |  |  | — |  |  | (29) |
Decrease due to settlements with tax authorities | (16) |  |  | (64) |  |  | (6) |
Decrease due to lapse of statute of limitations | (10) |  |  | (6) |  |  | (18) |
Balance at September 30 | $ | 240 |  |  | $ | 221 |  |  | $ | 269 |
Unrecognized tax benefits that would affect the effective tax rate if recognized | $ | 285 |  |  | $ | 257 |  |  | $ | 366 |
The following were included for the years ended September 30 as a component of Income tax provision on the consolidated statements of income.
(Millions of dollars) | 2025 |  | 2024 |  | 2023
Interest and penalties associated with unrecognized tax benefits | $ | 15 |  |  | $ | 42 |  |  | $ | 20 |
The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of tax jurisdictions. The IRS has completed its audit of the BD combined company through fiscal year 2017. The IRS is reviewing BD’s fiscal years 2018 through 2023. For the other major tax jurisdictions where the Company conducts business, tax years are generally open after 2016. Deferred Income Taxes Deferred income taxes at September 30 consisted of:
| 2025 |  | 2024
(Millions of dollars) | Assets |  | Liabilities |  | Assets |  | Liabilities
Compensation and benefits | $ | 431 |  |  | $ | — |  |  | $ | 405 |  |  | $ | — |
Property and equipment | — |  |  | 359 |  |  | — |  |  | 391 |
Intangibles | — |  |  | 1,324 |  |  | — |  |  | 1,612 |
Loss and credit carryforwards | 3,476 |  |  | — |  |  | 2,954 |  |  | — |
Product remediation and other liabilities | 180 |  |  | — |  |  | 261 |  |  | — |
Capitalized research and development expenses (a) | 446 |  |  | — |  |  | 364 |  |  | — |
Other | 638 |  |  | 89 |  |  | 504 |  |  | 64 |
| 5,171 |  |  | 1,771 |  |  | 4,489 |  |  | 2,067 |
Valuation allowance | (3,431) |  |  | — |  |  | (2,990) |  |  | — |
Net (b) | $ | 1,740 |  |  | $ | 1,771 |  |  | $ | 1,498 |  |  | $ | 2,067 |
(a)As required by the 2017 Tax Cuts and Jobs Act, the Company’s research and development expenditures were capitalized and amortized in fiscal years 2025 and 2024 for income tax purposes. This resulted in an increase in cash tax paid in both years with a corresponding deferred tax benefit. (b)Net deferred tax assets are included in Other Assets and net deferred tax liabilities are included in Deferred Income Taxes and Other Liabilities on the consolidated balance sheets. Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. The Company asserts indefinite reinvestment for all historical unremitted foreign earnings as of September 30, 2025. Deferred taxes have not been provided on undistributed earnings of foreign subsidiaries as of September 30, 2025 since the determination of the total amount of unrecognized deferred tax liability is not practicable. Generally, deferred tax assets have been established as a result of net operating losses and credit carryforwards with expiration dates from 2025 to an unlimited expiration date. Valuation allowances have been established as a result of an evaluation of the uncertainty associated with the realization of certain deferred tax assets on these losses and credit carryforwards. The valuation allowance at September 30, 2025 is primarily the result of foreign losses due to the Company’s global re-organization of its foreign entities and these generally have no expiration date. Valuation allowances are also maintained with respect to deferred tax assets for certain state carryforwards that may not be realized. The net change during the year in the total valuation allowance is attributable to foreign losses and credits. Tax Rate Reconciliation A reconciliation of the federal statutory tax rate to the Company’s effective income tax rate for continuing operations was as follows:
| 2025 |  | 2024 |  | 2023
Federal statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local income taxes, net of federal tax benefit | (0.1) |  |  | (0.7) |  |  | (1.0) |
Foreign income tax at rates other than 21% | (14.0) |  |  | (9.1) |  |  | (8.2) |
Effect of foreign operations | 10.4 |  |  | 4.3 |  |  | (3.9) |
Effect of Research Credits, FDII and other credits (a) | (2.3) |  |  | (22.1) |  |  | (3.2) |
Effect of share-based compensation | (0.2) |  |  | (0.3) |  |  | (0.4) |
Effect of gain on divestitures | — |  |  | — |  |  | 3.2 |
Effect of valuation allowance on non-U.S. tax credits (a) | (5.0) |  |  | 19.3 |  |  | — |
Effect of nondeductible costs (b) | — |  |  | 2.2 |  |  | — |
Other, net | 1.0 |  |  | 0.4 |  |  | 0.4 |
Effective income tax rate | 10.8 | % |  | 15.0 | % |  | 7.9 | %
(a)During fiscal year 2024, the Company was granted non-U.S. tax credits, for which a full valuation allowance was established. Fiscal year 2025 reflects the valuation allowance activity related to non-U.S. tax credits. (b)Primarily related to the estimated liability recorded as a result of the SEC investigation, as further discussed in Note 6. Tax Holidays and Payments The approximate tax impacts related to tax holidays in various countries in which the Company does business are provided below. The tax holidays expire at various dates through 2039. The Company’s income tax payments, net of refunds are also provided below.
(Millions of dollars, except per share amounts) | 2025 |  | 2024 |  | 2023
Tax impact related to tax holidays | $ | 435 |  |  | $ | 414 |  |  | $ | 363 |
Impact of tax holiday on diluted earnings per share | 1.51 |  |  | 1.42 |  |  | 1.26 |
Income tax payments, net of refunds | 599 |  |  | 653 |  |  | 629 |
New Legislation On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA introduces amendments to U.S. tax laws, effective on various dates from 2025 to 2027. The Company is assessing the implications of this new U.S. tax legislation; however, it did not materially impact the Company’s consolidated financial results for fiscal year 2025.

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