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Income Taxes
 12 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). The Tax Act significantly revised the U.S. federal corporate income tax provisions, including, but not limited to, a reduction of the U.S. federal corporate statutory tax rate from 35% to 21%, a one-time transition tax on accumulated foreign earnings, an income inclusion of global intangible low-taxed income (“GILTI”), a deduction against foreign-derived intangible income (“FDII”) and a new minimum tax, the base erosion anti-abuse tax (“BEAT”). In accordance with ASC 740, the Company recorded the effects of the Tax Act during the three months ended December 31, 2017.
The Company has not recorded any income tax liability related to the one-time transition tax on accumulated foreign earnings (“Transition Tax”) due to an overall deficit in accumulated foreign earnings. GILTI, FDII and BEAT are effective for the Company’s fiscal year ending September 30, 2019. The Company has elected to recognize the GILTI impact in the specific period in which it occurs.
The domestic and foreign pretax income (loss) from continuing operations is as follows:
Fiscal Year Ended September 30,
202120202019
(in millions)
Domestic$182 $(655)$84 
Foreign274 208 183 
Income (loss) before income taxes$456 $(447)$267 
Current and deferred income tax expense provided are as follows:
Fiscal Year Ended September 30,
202120202019
(in millions)
Federal:
Current$6 $3 $— 
Deferred31 (28)(49)
Foreign:
Current (a)107 74 74 
Deferred(5)(28)(18)
U.S. State:
Current9 3 3 
Deferred1 (1)(1)
Income tax expense$149 $23 $9 
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(a)Includes withholding taxes of $26 million, $15 million and $17 million for the fiscal years ended September 30, 2021, 2020 and 2019, respectively.
The differences between the U.S. federal statutory income tax rate of 21.0% for each of the fiscal years ended September 30, 2021, 2020 and 2019 and income taxes provided are as follows:
Fiscal Year Ended September 30,
202120202019
(in millions)
Taxes on income at the U.S. federal statutory rate$96 $(94)$56 
U.S. state and local taxes10 2 2 
Foreign income taxed at different rates, including withholding taxes34 10 16 
Increase in valuation allowance2 1 1 
Release of valuation allowance(6)(38)(65)
Change in tax rates10 4 (4)
Impact of GILTI and FDII(4)2 (4)
IPO Costs— 22 — 
Executive Compensation2 2 — 
Non-deductible long term incentive plan3 112 6 
Other2 — 1 
Income tax expense$149 $23 $9 
During the fiscal year ended September 30, 2021, the Company recognized $10 million of income tax expense arising from an increase in our net U.K. deferred tax liability due to the change in the U.K. future statutory tax rate, which was offset by $4 million of excess tax benefits from long term incentive plan, and $6 million for the release of valuation allowances in Mexico and various foreign jurisdictions. During the fiscal year ended September 30, 2020, the Company recognized a net U.S. tax benefit of $25 million primarily related to the release of a U.S. deferred tax valuation allowance of $33 million offset by a write-off of expiring foreign tax credits of $10 million and a tax benefit of $15 million for the release of valuation allowances in Japan and various foreign jurisdictions. During the fiscal year ended September 30, 2019, the Company recognized a U.S. tax benefit of $59 million related to the release of valuation allowance on U.S. foreign tax credits.
For the fiscal years ended September 30, 2021 and September 30, 2020, the Company incurred losses in certain foreign territories and has offset the tax benefit associated with these losses with a valuation allowance as the Company has determined that it is more likely than not that these losses will not be utilized. For the fiscal year ended September 30, 2020, the Company released $33 million and of the U.S. valuation allowance related to foreign tax credit carryforwards. Significant components of the Company’s net deferred tax liabilities are summarized below:
September 30,
2021		September 30,
2020
(in millions)
Deferred tax assets:
Allowances and reserves$25 $30 
Employee benefits and compensation78 80 
Other accruals14 19 
Tax attribute carryforwards135 168 
Other3 22 
Total deferred tax assets255 319 
Less: Valuation allowance(38)(45)
Deferred tax assets, net of valuation allowance217 274 
Deferred tax liabilities:
Intangible assets(393)(369)
Total deferred tax liabilities(393)(369)
Net deferred tax liabilities$(176)$(95)
During the fiscal year ended September 30, 2021, the Company utilized a substantial portion of its foreign tax credit carryforwards in the U.S. The current levels of pre-tax income are sufficient to generate the minimum amount of future taxable income needed to support U.S. deferred tax assets realization. During the fiscal year ended September 30, 2020, as a result of final regulations regarding the interest expense allocation rules issued by the Internal Revenue Service in December of 2019, the Company concluded that it is more likely than not that the entire amount of the Company’s deferred tax assets related to foreign tax credits carryforwards in the U.S. will be realized.
At September 30, 2021, the Company has no remaining U.S. federal tax net operating loss carryforwards. The Company also has tax net operating loss carryforwards, with no expiration date, in France and Spain of $65 million and $25 million, respectively, and other tax net operating loss carryforwards in state, local and foreign jurisdictions that expire in various periods. In addition, the Company has foreign tax credit carryforwards for U.S. tax purposes of $68 million. The U.S. foreign tax credits will begin to expire in fiscal year 2022.
Deferred income taxes have not been recorded on indefinitely reinvested earnings of certain foreign subsidiaries of approximately $259 million at September 30, 2021. Distribution of these earnings may result in foreign withholding taxes and U.S. state taxes. However, variables existing if and when remittance occurs make it impracticable to estimate the amount of the ultimate tax liability, if any, on these accumulated foreign earnings.
The Company classifies interest and penalties related to uncertain tax position as a component of income tax expense. As of September 30, 2021 and September 30, 2020, the Company had accrued $4 million and $4 million of interest and penalties, respectively.
The following table reflects changes in the gross unrecognized tax benefits, including interest and penalties:
Fiscal Year Ended September 30,
202120202019
(in millions)
Gross unrecognized tax benefits - beginning of period$12 $12 $18 
Additions for prior year tax positions3 3 1 
Subtractions for prior year tax positions(3)(3)(7)
Gross unrecognized tax benefits - end of period$12 $12 $12 
Included in the total unrecognized tax benefits at September 30, 2021 and September 30, 2020 are $12 million and $12 million, respectively, that if recognized, would reduce the effective income tax rate. The Company has determined that it is reasonably possible that the gross unrecognized tax benefits as of September 30, 2021 could decrease by up to approximately $2 million related to various ongoing audits and settlement discussions in various foreign jurisdictions during the next twelve months.
The Company and its subsidiaries file income tax returns in the U.S. and various foreign jurisdictions. The Company has completed tax audits in the U.S. for tax years ended through September 30, 2013, in the U.K. for the tax years ended through September 30, 2016, in Germany for the tax years ended through September 30, 2014 and in France for the tax years ended through September 30, 2018. The Company is at various stages in the tax audit process in certain foreign and local jurisdictions.