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Income Taxes | 6 Months Ended
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Mar. 31, 2019
Income Taxes |
Income Taxes | 10. Income Taxes The Company's effective tax rate was (8.7)% and 130.4% for the six months ended March 31, 2019 and 2018, respectively. The most significant items contributing to the difference between the statutory U.S. federal income tax rate of 21.0% and the Company's effective tax rate for the six-month period ended March 31, 2019 was a $38.1 million benefit related to the release of a valuation allowance on foreign tax credits during the first quarter of fiscal 2019 and a $12.3 million benefit related to income tax credits and incentives, partially offset by state income tax expense of $7.4 million. These items are expected to have a continuing impact on the effective tax rate for the remainder of the fiscal year, except for the benefit related to the release of the valuation allowance. The most significant items contributing to the difference between the statutory U.S. federal income tax rate of 24.5% and the Company’s effective tax rate for the six-month period ended March 31, 2018 were a $41.7 million net benefit related to one-time U.S. federal tax law changes, benefits of $36.0 million related to changes in uncertain tax positions primarily in the U.S. and Canada, and a benefit of $13.7 million related to income tax credits and incentives, partially offset by tax expense of $33.9 million related to the goodwill impairment charge, which was non-deductible for tax purposes. During the first quarter of fiscal 2019, a valuation allowance in the amount of $38.1 million related to foreign tax credits was released due to sufficient positive evidence obtained during the quarter. The positive evidence included the issuance of regulations during the quarter related to the Tax Cuts and Jobs Act (Tax Act) and forecasting the utilization of the foreign tax credits within the foreseeable future. The Company evaluated the new positive evidence against any negative evidence to determine the valuation allowance was no longer needed. During the second quarter of fiscal 2018, the Company recorded an income tax benefit of $26.2 million primarily as a result of a favorable settlement of uncertain tax positions in the U.S. related to R&D credits for tax years 2012, 2013 and 2014 and the remeasurement of its U.S. R&D credit uncertain tax positions for future years based on the favorable outcome of the examination. During the first quarter of fiscal 2018, President Trump signed the Tax Act into law. The Tax Act reduced the Company’s U.S. federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on accumulated earnings of foreign subsidiaries, created new taxes on certain foreign sourced earnings, and eliminated or reduced certain deductions. Other significant provisions included a base erosion anti-abuse tax (BEAT) on excessive amounts paid to foreign related parties and a minimum tax on global intangible low-taxed income (GILTI). The Company has made an accounting policy election to recognize the current tax impact of GILTI as a period cost and has included the impact in the estimated annual effective tax rate as of March 31, 2019. Given the significance of the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allowed registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. The Company completed its accounting for the tax effects of enactment of the Tax Act during the first quarter of fiscal 2019. The Company is utilizing the annual effective tax rate method under ASC 740 to compute its interim tax provision. The Company’s effective tax rate fluctuates from quarter to quarter due to various factors including the change in the mix of global income and expenses, outcomes of administrative audits, changes in the assessment of valuation allowances due to management’s consideration of new positive or negative evidence during the quarter, and changes in enacted tax laws and their interpretations which upon enactment include possible tax reform around the world arising from the result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation Development which, if finalized and adopted, could have a material impact on the Company’s income tax expense and deferred tax balances. The Company is currently under tax audit in several jurisdictions and believes the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in adjustments, but will not result in a material change in the liability for uncertain tax positions. Generally, the Company does not provide for U.S. taxes or foreign withholding taxes on gross book-tax differences in its non-U.S. subsidiaries because such basis differences of approximately $1.8 billion are able to and intended to be reinvested indefinitely. The Company has determined it will continue to indefinitely reinvest the earnings of certain foreign subsidiaries and therefore will continue to account for these undistributed earnings based on existing accounting under ASC 740 and not accrue additional tax outside of the one-time transition tax described above. There may also be additional U.S. or foreign income tax liability upon repatriation, although the calculation of such additional taxes is not practicable.

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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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