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Income Taxes | 12 Months Ended
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Sep. 30, 2024
Income Taxes |
Income Taxes | 14. Income Taxes Income before income taxes included income from domestic operations of $233.0 million, loss of $129.2 million, and income of $235.2 million for fiscal years ended September 30, 2024, 2023 and 2022 and income from foreign operations of $485.2 million, $342.6 million, and $315.4 million for fiscal years ended September 30, 2024, 2023 and 2022. Income tax expense was comprised of: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended
​ |  | September 30, |  | September 30, |  | September 30,
​ | ​ | 2024 | ​ | 2023 | ​ | 2022
​ | ​ | (in millions)
Current: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ | $ | 15.1 | ​ | $ | 67.7 | ​ | $ | 22.8
State | ​ |  | (78.6) | ​ | ​ | 71.9 | ​ | ​ | 16.0
Foreign | ​ |  | 63.5 | ​ | ​ | 52.8 | ​ | ​ | 75.8
Total current income tax expense | ​ |  | — | ​ | ​ | 192.4 | ​ | ​ | 114.6
Deferred: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ |  | 45.2 | ​ | ​ | (71.8) | ​ | ​ | 22.1
State | ​ |  | 68.1 | ​ | ​ | (84.3) | ​ | ​ | 11.8
Foreign | ​ |  | 39.6 | ​ | ​ | 19.8 | ​ | ​ | (12.4)
Total deferred income tax expense (benefit) | ​ |  | 152.9 | ​ | ​ | (136.3) | ​ | ​ | 21.5
Total income tax expense | ​ | $ | 152.9 | ​ | $ | 56.1 | ​ | $ | 136.1
​ The major elements contributing to the difference between the U.S. federal statutory rate of 21% for fiscal years ended September 30, 2024, 2023 and 2022 and the effective tax rate are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended |
​ | ​ | September 30, | ​ | September 30, | ​ | September 30, |
​ | ​ | 2024 | ​ | 2023 | ​ | 2022 |
​ |  | Amount |  | % |  | Amount |  | % |  | Amount |  | % |
​ | ​ | (in millions) |
Tax at federal statutory rate | ​ | $ | 150.8 |  | 21.0 | % | $ | 44.8 |  | 21.0 | % | $ | 115.6 |  | 21.0 | %
State income tax, net of federal benefit | ​ |  | (8.5) |  | (1.2) | ​ |  | (7.1) |  | (3.3) | ​ |  | 20.2 |  | 3.7 | ​
Foreign residual income | ​ | ​ | 43.8 | ​ | 6.1 | ​ | ​ | 59.4 | ​ | 27.8 | ​ | ​ | 46.4 | ​ | 8.4 | ​
Nondeductible costs | ​ | ​ | 20.6 | ​ | 2.9 | ​ | ​ | 10.7 | ​ | 5.0 | ​ | ​ | 19.7 | ​ | 3.6 | ​
ACAP investment sale | ​ | ​ | 20.2 | ​ | 2.8 | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​
Change in uncertain tax positions | ​ | ​ | 18.6 | ​ | 2.6 | ​ | ​ | 9.4 | ​ | 4.4 | ​ | ​ | 15.4 | ​ | 2.8 | ​
Tax rate changes | ​ | ​ | 1.2 | ​ | 0.2 | ​ | ​ | (3.2) | ​ | (1.5) | ​ | ​ | (4.1) | ​ | (0.7) | ​
Audit settlement | ​ | ​ | 0.5 | ​ | 0.1 | ​ | ​ | 1.9 | ​ | 0.9 | ​ | ​ | (1.5) | ​ | (0.3) | ​
Income tax credits and incentives | ​ | ​ | (63.5) | ​ | (8.8) | ​ | ​ | (68.2) | ​ | (31.9) | ​ | ​ | (51.0) | ​ | (9.3) | ​
Valuation allowance | ​ | ​ | (12.6) | ​ | (1.8) | ​ | ​ | 16.6 | ​ | 7.8 | ​ | ​ | (18.0) | ​ | (3.3) | ​
Exclusion of tax on non-controlling interests | ​ | ​ | (12.5) | ​ | (1.7) | ​ | ​ | (9.4) | ​ | (4.4) | ​ | ​ | (5.1) | ​ | (0.9) | ​
Return to provision | ​ | ​ | (3.7) | ​ | (0.5) | ​ | ​ | (0.5) | ​ | (0.2) | ​ | ​ | (1.5) | ​ | (0.3) | ​
Foreign tax rate differential | ​ | ​ | (2.8) | ​ | (0.4) | ​ | ​ | 0.2 | ​ | 0.1 | ​ | ​ | 1.1 | ​ | 0.2 | ​
Tax exempt income | ​ | ​ | (2.5) | ​ | (0.4) | ​ | ​ | (3.3) | ​ | (1.5) | ​ | ​ | (5.9) | ​ | (1.1) | ​
Other items, net | ​ | ​ | 3.3 | ​ | 0.4 | ​ | ​ | 4.8 | ​ | 2.1 | ​ | ​ | 4.8 | ​ | 0.9 | ​
Total income tax expense | ​ | $ | 152.9 |  | 21.3 | % | $ | 56.1 |  | 26.3 | % | $ | 136.1 |  | 24.7 | %
​ During fiscal 2024, the Company recorded an increase in tax benefit of $38.4 million related to state income taxes due to apportionment factor changes for fiscal years 2016 through 2023. This benefit was partially offset by an increase in tax expense of $23.0 million related to uncertain tax positions. During fiscal 2024, the Company sold certain ACAP investments and recorded a reduction in valuation allowances of $21.0 million and a reduction in deferred tax assets of $20.2 million. In addition, the Company recorded a valuation allowance of $9.3 million related to the remaining ACAP investments. During fiscal 2024, the Company approved a tax planning strategy and restructured certain operations in Canada which resulted in a release of a valuation allowance related to net operating losses and other deferred tax assets of $11.7 million. The Company is now forecasting the utilization of the net operating losses within the foreseeable future. The positive evidence was evaluated against any negative evidence to determine the valuation was no longer needed. During fiscal 2024, the Company settled its tax audit in Hong Kong for fiscal year 2011 through fiscal year 2021 and recorded a tax benefit of $6.9 million due primarily to changes in uncertain tax positions. During fiscal 2023, valuation allowances in the amount of $21.0 million related to the AECOM Capital impairment charge were established for the portion of the charge that is not expected to be realized. During fiscal 2022, valuation allowances in the amount of $21.9 million primarily related to net operating losses in certain foreign entities were released due to sufficient positive evidence. The positive evidence included a realignment of the Company’s global transfer pricing methodology which resulted in forecasting the utilization of the net operating losses within the foreseeable future. The Company is currently under tax audit in several jurisdictions including the U.S. where its federal income tax returns for fiscal 2017 through 2020 are being examined by the IRS. Disputes can arise with tax authorities involving issues related to the timing of deductions, the calculation and use of credits, and the taxation of income in various tax jurisdictions because of differing interpretations or application of tax laws, regulations, and relevant facts. The IRS is currently auditing certain tax credits and the methodology for calculating the credits. While the Company has historically been able to sustain the credits in previous audit cycles without adjustment, the Company believes it’s reasonably possible there could be an adjustment to the liability for uncertain tax positions within the next twelve months related to this matter. However, given the early stages of the audit of these credits, the Company is not able to reasonably estimate the range of potential outcomes. Generally, the Company would reverse its valuation allowance in a particular tax jurisdiction if the positive evidence examined, such as projected and sustainable earnings or a tax-planning strategy that allows for the usage of the deferred tax asset, is sufficient to overcome significant negative evidence, such as large net operating loss carryforwards or a cumulative history of losses in recent years. In the United States, the valued deferred tax assets have a restricted life or use under relevant tax law and, therefore, it is unlikely that the valuation allowance related to these assets will reverse. In addition, the Company is continually investigating tax planning strategies that, if prudent and feasible, may be implemented to realize a deferred tax asset that would otherwise expire unutilized. The identification and internal/external approval (as relevant) of such a prudent and feasible tax planning strategy could cause a reduction in the valuation allowance. The deferred tax assets (liabilities) are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended
​ |  | September 30, |  | September 30,
​ | ​ | 2024 | ​ | 2023
​ | ​ | (in millions)
Deferred tax assets: | ​ | ​ | ​ | ​ | ​ | ​
Compensation and benefit accruals not currently deductible | ​ | $ | 85.4 | ​ | $ | 92.2
Net operating loss carryforwards | ​ |  | 107.5 | ​ |  | 102.3
Self-insurance reserves | ​ |  | 38.3 | ​ |  | 23.2
Research and experimentation and other tax credits | ​ |  | 67.1 | ​ |  | 43.1
Pension liability | ​ |  | 34.9 | ​ |  | 44.7
Accrued liabilities | ​ |  | 265.7 | ​ |  | 295.1
Capital loss carryforward | ​ | ​ | 49.5 | ​ | ​ | 64.0
Partnership investment | ​ |  | 22.3 | ​ |  | 102.0
Other | ​ |  | 8.2 | ​ |  | 7.1
Total deferred tax assets | ​ | ​ | 678.9 | ​ | ​ | 773.7
Deferred tax liabilities: | ​ |  | ​ | ​ |  | ​
Unearned revenue | ​ |  | (4.1) | ​ |  | (7.0)
Depreciation and amortization | ​ |  | (83.7) | ​ |  | (13.1)
Acquired intangible assets | ​ |  | — | ​ |  | (5.4)
Investment in subsidiaries | ​ | ​ | (9.9) | ​ | ​ | (10.7)
Right of use assets | ​ | ​ | (85.2) | ​ | ​ | (94.0)
Contingent consideration | ​ |  | (30.5) | ​ |  | (34.2)
Other | ​ |  | (5.4) | ​ |  | (15.5)
Total deferred tax liabilities | ​ | ​ | (218.8) | ​ | ​ | (179.9)
Valuation allowance | ​ | ​ | (160.9) | ​ | ​ | (171.2)
Net deferred tax assets | ​ | $ | 299.2 | ​ | $ | 422.6
​ As of September 30, 2024, and 2023, the Company has available unused federal, foreign and state net operating loss (NOL) carryforwards of $744.6 million and $757.5 million, respectively, which expire at various dates over the next several years and capital loss carryforwards of $181.2 million and $199.4 million, respectively, which mostly expire in 2025; some foreign NOL carryforwards never expire. In addition, as of September 30, 2024, the Company has unused federal, state and foreign research and development credits of $28.4 million, $27.8 million and $4.6 million, respectively, and other credits of $9.7 million which expire at various dates over the next several years. As of September 30, 2024 and 2023, gross deferred tax assets were $678.9 million and $773.7 million, respectively. The Company has recorded a valuation allowance of $160.9 million and $171.2 million as of September 30, 2024 and 2023, respectively, primarily related to foreign and state net operating loss carryforwards, capital loss carryforwards, tax credits and other deferred tax assets. The Company has performed an assessment of positive and negative evidence, including the nature, frequency, and severity of cumulative financial reporting losses in recent years, the future reversal of existing temporary differences, predictability of future taxable income exclusive of reversing temporary differences of the character necessary to realize the asset, relevant carryforward periods, taxable income in carry-back years if carry-back is permitted under tax law, and prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset that would otherwise expire. Although realization is not assured, based on the Company’s assessment, the Company has concluded that it is more likely than not that the remaining gross deferred tax asset (exclusive of deferred tax liabilities) of $518.0 million will be realized and, as such, no additional valuation allowance has been provided. The net decrease in the valuation allowance of $10.3 million is primarily attributable to a decrease in valuation allowances of $11.7 million related to the ACAP sale in the US, a decrease in valuation allowances on capital losses of $10.4 million, an increase in valuation allowances on foreign net operating losses and currency translation adjustments of $12.3 million, and decreases in valuation allowances of $0.6 million related to state net operating losses and credits. 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 $1.2 billion are able to and intended to be reinvested indefinitely. If these basis differences were distributed, foreign tax credits could become available under current law to partially or fully reduce the resulting U.S. income tax liability. There may also be additional U.S. or foreign income tax liability upon repatriation, although the calculation of such additional taxes is not practicable. As of September 30, 2024, and 2023, the Company had a liability for unrecognized tax benefits, including potential interest and penalties, net of related tax benefit, totaling $97.9 million and $79.5 million, respectively. The gross unrecognized tax benefits as of September 30, 2024 and 2023 were $81.3 million and $62.1 million, respectively, excluding interest, penalties, and related tax benefit. Of the $81.3 million, approximately $77.1 million would be included in the effective tax rate if recognized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year Ended
​ |  | September 30, |  | September 30,
​ | ​ | 2024 | ​ | 2023
​ | ​ | (in millions)
Balance at the beginning of the year | ​ | $ | 62.1 | ​ | $ | 55.2
Gross increase in current period’s tax positions | ​ |  | 34.5 | ​ |  | 3.5
Gross increase in prior years’ tax positions | ​ |  | 13.9 | ​ |  | 17.9
Gross decrease in prior years’ tax positions | ​ |  | (20.1) | ​ |  | (13.3)
Decrease due to settlement with tax authorities | ​ |  | (7.4) | ​ |  | (1.0)
Decrease due to lapse of statute of limitations | ​ |  | (2.2) | ​ |  | —
Gross change due to foreign exchange fluctuations | ​ | ​ | 0.5 | ​ | ​ | (0.2)
Balance at the end of the year | ​ | $ | 81.3 | ​ | $ | 62.1
​ The Company classifies interest and penalties related to uncertain tax positions within the income tax expense line in the accompanying consolidated statements of operations. As of September 30, 2024, the accrued interest and penalties were $27.7 million and $3.5 million, respectively, excluding any related income tax benefits. As of September 30, 2023, the accrued interest and penalties were $24.4 million and $1.5 million, respectively, excluding any related income tax benefits. The Company files income tax returns in numerous tax jurisdictions, including the U.S., and numerous U.S. states and non-U.S. jurisdictions around the world. The statute of limitations varies by jurisdiction in which the Company operates. Because of the number of jurisdictions in which the Company files tax returns, in any given year the statute of limitations in certain jurisdictions may expire without examination within the 12-month period from the balance sheet date. While it is reasonably possible that the total amounts of unrecognized tax benefits could significantly increase or decrease within the next twelve months, an estimate of the range of possible change cannot be made.

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