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Income Taxes | 12 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 7 — Income Taxes Income (loss) before income taxes comprises the following:
| 2024 |  | 2023 |  | 2022
Domestic | $ | 305 |  |  | $ | (346) |  |  | $ | 362 |
Foreign | 35 |  |  | (1,491) |  |  | 1,025 |
Total income (loss) before income taxes | $ | 340 |  |  | $ | (1,837) |  |  | $ | 1,387 |
The provisions for income taxes consist of the following:
| 2024 |  | 2023 |  | 2022
Current expense (benefit): |  |  |  |  |
Federal | $ | (25) |  |  | $ | (1) |  |  | $ | 24 |
State | 12 |  |  | 37 |  |  | 18 |
Foreign | 32 |  |  | 49 |  |  | 50 |
Total current expense | 19 |  |  | 85 |  |  | 92 |
Deferred expense (benefit): |  |  |  |  |
Federal | 82 |  |  | 34 |  |  | 45 |
State | 34 |  |  | (21) |  |  | (17) |
Foreign | (64) |  |  | (433) |  |  | 193 |
Total deferred expense (benefit) | 52 |  |  | (420) |  |  | 221 |
Total income tax expense (benefit) | $ | 71 |  |  | $ | (335) |  |  | $ | 313 |
Federal income taxes for Fiscal 2024, Fiscal 2023 and Fiscal 2022 are net of foreign tax credits of $17, $25, and $5, respectively. A reconciliation from the U.S. federal statutory tax rate to our effective tax rate is as follows:
| 2024 |  | 2023 |  | 2022
U.S. federal statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Difference in tax rate due to: |  |  |  |  |
Goodwill impairment not deductible for tax | 11.6 |  |  | (7.3) |  |  | — |
State income taxes, net of federal benefit | 6.8 |  |  | (1.7) |  |  | 2.3 |
Investment tax credits | (6.8) |  |  | 0.5 |  |  | — |
Valuation allowance adjustments | (6.3) |  |  | 1.1 |  |  | (0.5) |
Regulated entity depreciation normalization | (4.5) |  |  | 0.7 |  |  | (0.8) |
Notional interest deduction | (3.8) |  |  | 0.7 |  |  | (0.9) |
Effects of tax rate changes – State, net of federal benefit | 3.6 |  |  | 0.2 |  |  | (1.4) |
State NOL adjustment upon disposition | 2.4 |  |  | — |  |  | — |
Uncertain tax positions | (2.4) |  |  | (0.7) |  |  | — |
Impairment of equity investment | 2.2 |  |  | — |  |  | — |
Federal refund interest accrual | (1.1) |  |  | — |  |  | — |
Effects of foreign operations | 0.1 |  |  | 3.1 |  |  | 5.3 |
Effects of tax rate changes - International | — |  |  | — |  |  | (2.3) |
Other, net | (1.9) |  |  | 0.6 |  |  | (0.1) |
Effective tax rate | 20.9 | % |  | 18.2 | % |  | 22.6 | %
In July 2022, tax legislation was enacted in Pennsylvania reducing the state’s corporate net income tax rate from 9.99% to 4.99% over a nine-year period, beginning with an initial reduction to 8.99% beginning in Fiscal 2024. The legislation resulted in $12 tax expense and $4 of tax benefits being recorded in Fiscal 2024 and Fiscal 2023, respectively, based on the Company’s analysis of future reversals of net deferred tax liabilities. Federal refund claims of $56 and $36 are included in “Income taxes receivable” on the Consolidated Balance Sheet at September 30, 2024 and 2023, respectively. $36 of refund claims at September 30, 2024 and 2023 are related to Fiscal 2021 federal net operating losses carried back to Fiscal 2016 under CARES legislation enacted in 2020. The CARES refund claim is under Joint Committee review. Our effective tax rate is subject to the impact of changes to the taxation of foreign source income made by the TCJA and the high tax exception regulations issued in July 2020. Income tax expense for Fiscal 2024, Fiscal 2023 and Fiscal 2022 includes $2, $13, and $3, respectively, of GILTI taxes that are treated as current period costs and carry no related deferred taxes. Pennsylvania and West Virginia utility ratemaking practices permit the flow through to ratepayers of state tax benefits resulting from accelerated tax depreciation. For Fiscal 2024, Fiscal 2023 and Fiscal 2022, the beneficial effects of state tax flow through of accelerated depreciation reduced income tax expense by $12, $11, and $10, respectively. Deferred tax liabilities (assets) comprise the following at September 30:
| 2024 |  | 2023 |
Excess book basis over tax basis of property, plant and equipment | $ | 994 |  |  | $ | 966 |  |
Intangible assets and goodwill | 86 |  |  | 81 |  |
Utility regulatory assets | 74 |  |  | 84 |  |
Investment in AmeriGas Partners | 31 |  |  | — |  |
Derivative instrument assets | — |  |  | 19 |  |
Other | 50 |  |  | 37 |  |
Gross deferred tax liabilities | 1,235 |  |  | 1,187 |  |
Interest expense | (118) |  |  | (83) |  |
Operating loss carryforwards | (72) |  |  | (75) |  |
Utility regulatory liabilities | (72) |  |  | (83) |  |
Foreign tax credit carryforwards | (49) |  |  | (64) |  |
Employee-related benefits | (33) |  |  | (37) |  |
Investment tax credits | (26) |  |  | — |  |
Utility environmental liabilities | (16) |  |  | (15) |  |
Pension plan liabilities | (8) |  |  | (14) |  |
Derivative instrument liabilities | (3) |  |  | — |  |
Investment in AmeriGas Partners | — |  |  | (28) |  |
Other | (58) |  |  | (58) |  |
Gross deferred tax assets | (455) |  |  | (457) |  |
Deferred tax assets valuation allowance | 130 |  |  | 141 |  |
Net deferred tax liabilities | $ | 910 |  |  | $ | 871 |  |
At September 30, 2024, we carried foreign net operating loss carryforwards of $9 relating to Flaga, $22 at certain subsidiaries of UGI France, $8 relating to Belgium, and $66 in the Netherlands with no expiration dates. We have state net operating loss carryforwards primarily relating to certain subsidiaries that approximate $1,223 and expire through 2044. We also have federal operating loss carryforwards of $4 for certain operations of AmeriGas Propane. At September 30, 2024, deferred tax assets relating to operating loss carryforwards amounted to $72 related to various UGI subsidiaries. Valuation allowances against deferred tax assets exist for foreign tax credit carryforwards, net operating loss carryforwards of foreign subsidiaries, capital loss carryforwards and a notional interest deduction. The valuation allowance for all deferred tax decreased $11 in Fiscal 2024, which included a decrease of $22 against the notional interest deduction, $4 against capital losses and $1 against FTC’s offset by a $5 increase against Foreign net operating losses and $11 against disallowed interest expense. The valuation allowance for all deferred tax remained the same in Fiscal 2023, which included an increase of $19 for disallowed interest, an increase of $11 for foreign net operating losses, $5 for a notional interest deduction and $3 from state tax rate decreases were offset by $22 decrease against capital losses and a $16 decrease against FTC’s. We conduct business and file tax returns in the U.S., and various local, state and foreign jurisdictions. Our U.S. federal income tax returns are settled through the 2020 tax year, and our European tax returns are effectively settled for various years from 2016 to 2020. State and other income tax returns in the U.S. are generally subject to examination for a period of three to five years after the filing of the respective returns. The Company’s unrecognized tax benefits including amounts related to accrued interest, which if subsequently recognized would be recorded as a benefit to income taxes, amounted to $18, $26, and $5 at September 30, 2024, 2023 and 2022, respectively. Generally, a net reduction in unrecognized tax benefits could occur because of the expiration of the statute of limitations in certain jurisdictions or as a result of settlements with tax authorities. The expected change in unrecognized tax benefits and related interest in the next twelve months as the result of the expiration of certain statutes is not material. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| 2024 |  | 2023 |  | 2022
Unrecognized tax benefits — beginning of year | $ | 26 |  |  | $ | 5 |  |  | $ | 3 |
Additions for tax positions of the current year | 4 |  |  | 3 |  |  | 2 |
Decreases for tax positions taken in prior years | (11) |  |  | — |  |  | — |
Increases for tax positions taken in prior years | — |  |  | 19 |  |  | 1 |
Settlements with tax authorities/statute lapses | (1) |  |  | (1) |  |  | (1) |
Unrecognized tax benefits — end of year | $ | 18 |  |  | $ | 26 |  |  | $ | 5 |

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