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Income Taxes | 12 Months Ended
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Sep. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Note Q. Income Taxes Income from operations before income taxes and equity in net earnings of affiliated companies was as follows:
|  | Years Ended September 30 |
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | (In millions) |
Domestic |  | $ | 15 |  |  | $ | 18 |  |  | $ | 65 |
Foreign |  |  | 550 |  |  |  | 511 |  |  |  | 386 |
Income from operations before income taxes and equity in earnings of affiliated companies |  | $ | 565 |  |  | $ | 529 |  |  | $ | 451 |
Tax provision (benefit) for income taxes consisted of the following:
|  | Years Ended September 30 |
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | (In millions) |
U.S. federal and state: |  |  |  |  |  |  |  |  |
Current |  | $ | 21 |  |  | $ | 14 |  |  | $ | 5 |
Deferred |  |  | 39 |  |  |  | (31 | ) |  |  | (156 | )
Total |  |  | 60 |  |  |  | (17 | ) |  |  | (151 | )
Foreign: |  |  |  |  |  |  |  |  |
Current |  |  | 143 |  |  |  | 134 |  |  |  | 123 |
Deferred |  |  | (7 | ) |  |  | (6 | ) |  |  | — |
Total |  |  | 136 |  |  |  | 128 |  |  |  | 123 |
Provision (benefit) for income taxes |  | $ | 196 |  |  | $ | 111 |  |  | $ | (28 | )
The provision (benefit) for income taxes differed from the provision for income taxes as calculated using the U.S. statutory rate as follows:
|  | Years Ended September 30 |
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | (In millions) |
Computed tax expense at the federal statutory rate |  | $ | 119 |  |  | $ | 111 |  |  | $ | 95 |
Foreign impact of taxation at different rates, repatriation, valuation allowance, and other |  |  | 25 |  |  |  | 16 |  |  |  | 30 |
Global Intangible Low Taxed Income (GILTI) |  |  | — |  |  |  | (3 | ) |  |  | 15 |
Impact of increase (decrease) in valuation allowance on U.S. deferred taxes |  |  | 42 |  |  |  | (13 | ) |  |  | (156 | )
U.S. and state benefits from research and experimentation activities |  |  | (3 | ) |  |  | (3 | ) |  |  | (2 | )
Provision (settlement) of unrecognized tax benefits |  |  | 12 |  |  |  | 7 |  |  |  | 2 |
Permanent differences, net |  |  | 1 |  |  |  | (2 | ) |  |  | (4 | )
State taxes, net of federal effect |  |  | — |  |  |  | (2 | ) |  |  | (8 | )
Provision (benefit) for income taxes |  | $ | 196 |  |  | $ | 111 |  |  | $ | (28 | )
Significant components of deferred income taxes were as follows:
|  | September 30 |
|  | 2025 |  |  | 2024 |
|  | (In millions) |
Deferred tax assets: |  |  |  |  |  |
Deferred expenses |  | $ | 42 |  |  | $ | 40 |
Intangible assets |  |  | 52 |  |  |  | 47 |
Inventory |  |  | 15 |  |  |  | 14 |
Operating lease liability |  |  | 28 |  |  |  | 29 |
Other |  |  | 26 |  |  |  | 25 |
U.S. federal interest expense carryforward |  |  | 56 |  |  |  | 48 |
Pension and other benefits |  |  | 22 |  |  |  | 25 |
Net operating loss carryforwards ("NOLs") |  |  | 249 |  |  |  | 261 |
Capital loss carryforwards |  |  | 132 |  |  |  | 132 |
Foreign tax credit carryforwards |  |  | 66 |  |  |  | 68 |
R&D credit carryforwards |  |  | 57 |  |  |  | 55 |
Other business credit carryforwards |  |  | 16 |  |  |  | 21 |
Subtotal |  |  | 761 |  |  |  | 765 |
Valuation allowance |  |  | (516 | ) |  |  | (494 | )
Total deferred tax assets |  | $ | 245 |  |  | $ | 271 |
|  | September 30 |
|  | 2025 |  |  | 2024 |
|  | (In millions) |
Deferred tax liabilities: |  |  |  |  |  |
Property, plant and equipment |  | $ | (67 | ) |  | $ | (58 | )
Right of use asset |  |  | (21 | ) |  |  | (23 | )
Unremitted earnings of non-U.S. subsidiaries |  |  | (16 | ) |  |  | (16 | )
Total deferred tax liabilities |  | $ | (104 | ) |  | $ | (97 | )
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit utilization of the existing deferred tax assets. When performing this assessment, the Company looks to the potential future reversal of existing taxable temporary differences, taxable income in carryback years and the feasibility of tax planning strategies and estimated future taxable income. Failure to achieve operating income targets resulting in a cumulative loss may change the Company’s assessment regarding the realization of Cabot’s deferred tax assets, resulting in valuation allowances being recorded against some or all of the Company’s deferred tax assets. The need for a valuation allowance can also be affected by changes to tax laws, changes to statutory tax rates and changes to future taxable income estimates. A valuation allowance represents management’s best estimate of the non-realizable portion of the deferred tax assets. Any adjustments in a valuation allowance would result in an adjustment to Provision (benefit) for income taxes in the Consolidated Statement of Operations. The One Big Beautiful Bill Act (“OBBBA”), was signed into law on July 4, 2025. The OBBBA includes numerous provisions that affect corporate taxation, including permanent extension of certain provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and restoration of favorable tax treatment for certain business provisions. ASC 740, “Income Taxes”, requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. The impact of these changes required the Company to re-evaluate its deferred taxes and subsequently record an increase in the valuation allowance related to future anticipated expirations of tax credit carryforwards. The provisions in the legislation are generally effective for the Company beginning in fiscal 2026 and are not expected to have any additional material impact on the Company’s Consolidated Financial Statements. Since 2020, the Company has maintained a valuation allowance against its net U.S. deferred tax assets. On a quarterly basis, the Company evaluates all positive and negative evidence to determine if a valuation allowance is required. Based on updated forecasts of future taxable income and changes in tax laws, the Company determined that it is more likely than not that a portion of its tax credit carryforwards would not be realizable and increased the valuation allowance recorded against its U.S. Deferred tax assets by $31 million for fiscal 2025, compared to a non-cash income tax benefit of $24 million recorded in fiscal 2024. The Company continues to maintain a valuation allowance in the U.S. against capital losses, interest expense limitation carryforwards, certain foreign tax credits, certain R&D tax credits, and all state deferred tax assets that the Company does not expect to realize. The valuation allowance increased by $22 million from $494 million in fiscal 2024 to $516 million in fiscal 2025, primarily due an adjustment to the valuation allowance on U.S. foreign tax credits and R&D tax credits, which was partially offset by a decrease in valuation allowance on foreign deferred tax assets. After the valuation allowance, approximately $30 million of foreign NOLs and less than $1 million of other tax credit carryforwards remained at September 30, 2025. The benefits of these carryforwards are dependent upon taxable income during the carryforward period in the jurisdictions in which they arose. The following table provides detail surrounding the expiration dates of NOLs, capital loss and other tax credit carryforwards before valuation allowances:
Years Ending September 30 |  | NOLs/Capital Losses |  |  | Credits |
|  | (In millions) |
2026 — 2032 |  | $ | 1,014 |  |  | $ | 76 |
2033 and thereafter |  |  | 308 |  |  |  | 62 |
Indefinite carryforwards |  |  | 915 |  |  |  | 2 |
Total |  | $ | 2,237 |  |  | $ | 140 |
As of September 30, 2025, provisions have not been made for non-U.S. withholding taxes or other applicable taxes on $2 billion of undistributed earnings of non-U.S. subsidiaries as these earnings are considered indefinitely reinvested. It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings. Cabot continually reviews the financial position and forecasted cash flows of its U.S. consolidated group and foreign subsidiaries in order to reaffirm the Company’s intent and ability to continue to indefinitely reinvest earnings of its foreign subsidiaries or whether such earnings will need to be repatriated in the foreseeable future. Such review encompasses operational needs and future capital investments. From time to time, however, the Company’s intentions relative to specific indefinitely reinvested amounts change because of certain unique circumstances. These earnings could become subject to non-U.S. withholding taxes and other applicable taxes if they were remitted to the U.S. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2025, 2024 and 2023 is as follows:
|  | Years Ended September 30 |
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | (In millions) |
Balance at beginning of the year |  | $ | 22 |  |  | $ | 20 |  |  | $ | 159 |
Additions based on tax positions related to the current year |  |  | 2 |  |  |  | 1 |  |  |  | 1 |
Additions for tax positions of prior years |  |  | 8 |  |  |  | 3 |  |  |  | — |
Reductions of tax positions of prior years |  |  | (2 | ) |  |  | (1 | ) |  |  | (137 | )
Reductions related to settlements |  |  | (1 | ) |  |  | (1 | ) |  |  | (2 | )
Reductions from lapse of statute of limitations |  |  | — |  |  |  | — |  |  |  | (1 | )
Balance at end of the year |  | $ | 29 |  |  | $ | 22 |  |  | $ | 20 |
Cabot has filed its tax returns in accordance with the tax laws in each jurisdiction and recognizes tax benefits for uncertain tax positions when the position would more likely than not be sustained based on its technical merits and recognizes measurement adjustments when needed. As of September 30, 2025, the total amount of unrecognized tax benefits was $29 million, of which $9 million was recorded in Accounts payable and accrued liabilities, $9 million in Other liabilities in the Consolidated Balance Sheet and $11 million was offset against deferred tax assets. As of September 30, 2024, the total amount of unrecognized tax benefits was $22 million, of which $9 million was recorded in Other liabilities in the Consolidated Balance Sheet and $13 million was offset against deferred tax assets. In 2022, the Company reported an uncertain tax position of $137 million related to the initial anticipated filing position on the character of a portion of the tax loss from the Purification Solutions business divestiture. Upon completion of the U.S. Consolidated tax return in 2023, the Company reversed the $137 million unrecognized tax benefit which reflects the final position taken on the filed tax return. In addition, accruals of $13 million and $10 million were recorded for penalties and interest, as of September 30, 2025 and 2024, respectively. Total penalties and interest recorded in the Provision (benefit) for income taxes in the Consolidated Statements of Operations was $5 million in fiscal 2025 and 2024, and $2 million in fiscal 2023. If the unrecognized tax benefits were recognized as of September 30, 2025, there would be $29 million favorable impact on the Company’s tax provision before consideration of the impact of the potential need for valuation allowances. Cabot and certain subsidiaries are under audit in a number of jurisdictions. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a further change in the unrecognized tax benefits may occur within the next twelve months related to the settlement of one or more of these audits or the lapse of applicable statutes of limitations; however, an estimated range of the impact on the unrecognized tax benefits cannot be quantified at this time. Cabot is subject to taxation in the United States and various states and foreign jurisdictions. The 2022 through 2024 tax years remain subject to examination by the IRS and various tax years from 2019 through 2024 remain subject to examination by the respective state tax authorities. In foreign jurisdictions, various tax years from 2006 through 2024 remain subject to examination by their respective tax authorities.

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