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Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The domestic and foreign pretax income from continuing operations is as follows:
| Fiscal Year Ended September 30,
| 2024 |  | 2023 |  | 2022
| (in millions)
Domestic | $ | 67 |  |  | $ | 218 |  |  | $ | 385 |
Foreign | 534 |  |  | 391 |  |  | 355 |
Income before income taxes | $ | 601 |  |  | $ | 609 |  |  | $ | 740 |
Current and deferred income tax expense provided are as follows:
| Fiscal Year Ended September 30,
| 2024 |  | 2023 |  | 2022
| (in millions)
Federal: |  |  |  |  |
Current | $ | 26 |  |  | $ | 36 |  |  | $ | 23 |
Deferred | (45) |  |  | (5) |  |  | 44 |
Foreign: |  |  |  |  |
Current (a) | 137 |  |  | 128 |  |  | 128 |
Deferred | 3 |  |  | (3) |  |  | (30) |
U.S. State: |  |  |  |  |
Current | 8 |  |  | 19 |  |  | 21 |
Deferred | (6) |  |  | (5) |  |  | (1) |
Income tax expense | $ | 123 |  |  | $ | 170 |  |  | $ | 185 |
______________________________________ (a)Includes withholding taxes of $28 million, $38 million and $27 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively. The differences between the U.S. federal statutory income tax rate of 21.0% for each of the fiscal years ended September 30, 2024, 2023 and 2022 and income taxes provided are as follows:
| Fiscal Year Ended September 30,
| 2024 |  | 2023 |  | 2022
| (in millions)
Taxes on income at the U.S. federal statutory rate | $ | 126 |  |  | $ | 128 |  |  | $ | 155 |
U.S. state and local taxes | 1 |  |  | 12 |  |  | 15 |
Foreign income taxed at different rates, including withholding taxes | 29 |  |  | 33 |  |  | 29 |
Valuation allowance | — |  |  | (5) |  |  | (6) |
Change in tax rates | 3 |  |  | — |  |  | 1 |
GILTI and FDII | (3) |  |  | (4) |  |  | (6) |
Federal research and development credits | (3) |  |  | (8) |  |  | — |
Uncertain tax positions | (3) |  |  | 7 |  |  | (3) |
Non-deductible compensation | 11 |  |  | 8 |  |  | 6 |
Wind down of O&O media properties | (17) |  |  | — |  |  | — |
Return to provision adjustments | (15) |  |  | 4 |  |  | (4) |
Nontaxable income from partnerships | (9) |  |  | (1) |  |  | (1) |
Other | 3 |  |  | (4) |  |  | (1) |
Total income tax expense | $ | 123 |  |  | $ | 170 |  |  | $ | 185 |
During the fiscal year ended September 30, 2024, the Company recognized a tax benefit of $15 million primarily related to change in prior year estimate for allowable costs for reported foreign derived intangible income. During the fiscal year ended September 30, 2023, the Company recognized a tax benefit of $8 million related to Federal research and development credits, which was partially offset by $7 million of income tax expense arising from an increase in uncertain tax positions in various jurisdictions. During the fiscal year ended September 30, 2022, the Company recognized a tax benefit of $8 million for the release of valuation allowances in various foreign jurisdictions. For the fiscal years ended September 30, 2024 and September 30, 2023, 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. Significant components of the Company’s net deferred tax liabilities are summarized below:
| September 30, 2024 |  | September 30, 2023
| (in millions)
Deferred tax assets: |  |  |
Allowance and reserves | $ | 27 |  |  | $ | 25 |
Employee benefits and compensation | 80 |  |  | 71 |
Other accruals | 45 |  |  | 30 |
Property, plant and equipment | 61 |  |  | 40 |
Operating lease liabilities | 69 |  |  | 73 |
Tax attribute carryforwards | 62 |  |  | 59 |
Deferred revenue and debt | 14 |  |  | 17 |
Total deferred tax assets | 358 |  |  | 315 |
Less: Valuation allowance | (25) |  |  | (25) |
Deferred tax assets, net of valuation allowance | 333 |  |  | 290 |
Deferred tax liabilities: |  |  |
Royalty advances | (34) |  |  | (27) |
Operating lease right-of-use assets | (57) |  |  | (60) |
Accrued royalties | (52) |  |  | (45) |
Intangible assets | (284) |  |  | (318) |
Debt and other | (49) |  |  | (24) |
Total deferred tax liabilities | (476) |  |  | (474) |
Net deferred tax liabilities | $ | (143) |  |  | $ | (184) |
At September 30, 2024, the Company has no remaining U.S. federal tax net operating loss carryforwards and $21 million tax net operating loss carryforwards in U.S. state and local jurisdictions that expire in various periods. The Company also has tax net operating loss carryforwards, with no expiration date, in France, Spain, and the United Kingdom of $11 million, $5 million, and $5 million, respectively, and other tax net operating loss carryforwards in foreign jurisdictions that expire in various periods. Deferred income taxes have not been recorded on indefinitely reinvested earnings of certain foreign subsidiaries of approximately $456 million at September 30, 2024. 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, 2024 and September 30, 2023, the Company had accrued $1 million and $2 million of interest and penalties, respectively. The following table reflects changes in the gross unrecognized tax benefits:
| Fiscal Year Ended September 30,
| 2024 |  | 2023 |  | 2022
| (in millions)
Gross unrecognized tax benefits - beginning of period | $ | 13 |  |  | $ | 8 |  |  | $ | 12 |
Additions for current year tax positions | 2 |  |  | 3 |  |  | — |
Additions for prior year tax positions | — |  |  | 9 |  |  | 1 |
Subtractions for prior year tax positions | (3) |  |  | (7) |  |  | (5) |
Settlements | (2) |  |  | — |  |  | — |
Gross unrecognized tax benefits - end of period | $ | 10 |  |  | $ | 13 |  |  | $ | 8 |
Included in the total unrecognized tax benefits at September 30, 2024 and September 30, 2023 are $11 million and $14 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, 2024 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 UK for the tax years ended through September 30, 2020, in Germany for the tax years ended through September 30, 2018 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. The Organization Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax by January 1, 2025. The Company is currently evaluating the potential impact of the rules.

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