XML 155 R20.htm IDEA: XBRL DOCUMENT
v3.19.3

Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE M – INCOME TAXES Tax Law Changes The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017. The Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At September 30, 2018, Ashland had not completed the internal accounting assessment for the tax effects of enactment of the Tax Act; however, Ashland determined a reasonable estimate of the effects on Ashland’s existing deferred tax balances and the one-time transition tax. Due to the Tax Act, Ashland recognized a provisional amount during 2018, which is included as a component of income tax expense from continuing operations. Ashland recorded net unfavorable tax adjustments of $2 million during 2018 primarily related to deferred tax rate changes and a one-time transition tax assessed on foreign cash and unremitted earnings. This adjustment included an expense of $128 million related to the one-time transition tax, a benefit of $139 million related to the tax deferred rate change and other tax expense of $13 million. The one-time transition tax and deferred rate change associated with the Tax Act are discussed in greater detail below. During 2019, Ashland completed its internal accounting assessment for the tax effects of enactment of the Tax Act and recorded adjustments to provisional amounts previously recorded. Ashland’s final assessment resulted in net unfavorable tax adjustments of $29 million during the twelve months ended September 30, 2019. These adjustments primarily related to the one-time transition tax assessed on foreign cash and unremitted earnings. There could be additional guidance issued subsequent to September 30, 2019 that could impact Ashland’s interpretation of the Tax Act and such changes could affect the amounts recorded. The impact, if any, of further transitional tax guidance that may be issued by the U.S. Treasury would be reflected in the Company’s provision for income tax in the period such guidance is effective. Provisional amounts - Deferred tax assets and liabilities Ashland remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The provisional amount recorded related to the remeasurement of the deferred tax balance was a favorable tax adjustment of $139 million during 2018. Provisional amounts - Foreign tax effects The one-time transition tax is based on Ashland's total post-1986 earnings and profits (E&P) of foreign subsidiaries that were previously deferred from U.S. income taxes. Ashland recorded a provisional amount for this one-time transition tax of $128 million during 2018, which includes the one-time transition tax expense of $187 million, a foreign tax credit benefit of $46 million, a reversal of uncertain tax position benefits of $9 million, state tax expense of $2 million and a benefit for other miscellaneous items of $6 million. Ashland completed its calculation of the total post-1986 E&P for these foreign subsidiaries and recorded an additional unfavorable $29 million adjustment in 2019. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as management intends to indefinitely reinvest all foreign earnings. Ashland determined that estimating the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time. Global Intangible Low-Taxed Income Regarding new Global Intangible Low-Taxed Income (GILTI) tax rules, Ashland has made an accounting policy election to treat taxes due on future GILTI exclusions in U.S. taxable income as a current period expense when incurred. Income Tax Provision A summary of the provision for income taxes related to continuing operations follows.
(In millions) |  | 2019 |  |  | 2018 |  |  | 2017 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (2 | ) |  | $ | 20 |  |  | $ | (26 | )
State |  |  | (7 | ) |  |  | (2 | ) |  |  | (1 | )
Foreign |  |  | 35 |  |  |  | 74 |  |  |  | 37 |
|  |  | 26 |  |  |  | 92 |  |  |  | 10 |
Deferred |  |  | 20 |  |  |  | (100 | ) |  |  | (26 | )
Income tax expense (benefit) |  | $ | 46 |  |  | $ | (8 | ) |  | $ | (16 | )
Foreign net operating loss carryforwards primarily relate to certain European and Asian Pacific operations and generally may be carried forward. U.S. state net operating loss carryforwards relate to losses within certain states and generally may be carried forward. Temporary differences that give rise to significant deferred tax assets and liabilities as of September 30 are presented in the following table.
(In millions) |  | 2019 |  |  | 2018 |
Deferred tax assets |  |  |  |  |  |  |  |
Foreign net operating loss carryforwards (a) |  | $ | 36 |  |  | $ | 39 |
Employee benefit obligations |  |  | 29 |  |  |  | 28 |
Environmental, self-insurance and litigation reserves (net of receivables) |  |  | 114 |  |  |  | 119 |
State net operating loss carryforwards (net of unrecognized tax benefits) (b) |  |  | 38 |  |  |  | 48 |
Compensation accruals |  |  | 28 |  |  |  | 31 |
Credit carryforwards (net of unrecognized tax benefits) (c) |  |  | 10 |  |  |  | 10 |
Other items |  |  | 38 |  |  |  | 32 |
Valuation allowances (d) |  |  | (83 | ) |  |  | (79 | )
Total deferred tax assets |  |  | 210 |  |  |  | 228 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Goodwill and other intangibles (e) |  |  | 243 |  |  |  | 269 |
Property, plant and equipment |  |  | 207 |  |  |  | 217 |
Unremitted earnings |  |  | 1 |  |  |  | — |
Total deferred tax liabilities |  |  | 451 |  |  |  | 486 |
Net deferred tax liability |  | $ | (241 | ) |  | $ | (258 | )
(a) | Gross net operating loss carryforwards of $133 million will expire in future years beyond 2021 or have no expiration.
(b) | Apportioned net operating loss carryforwards generated of $0.9 billion will expire in future years as follows: $48 million in 2020, $57 million in 2021 and the remaining balance in other future years.
(c) | Credit carryforwards consist primarily of foreign tax credits of $4 million expiring in future years beyond 2020, and miscellaneous tax credits that will expire in 2024 or other future years.
(d) | Valuation allowances primarily relate to certain state and foreign net operating loss carryforwards.
(e) | The total gross amount of goodwill as of September 30, 2019 expected to be deductible for tax purposes is $8 million.
The U.S. and foreign components of income from continuing operations before income taxes and a reconciliation of the statutory federal income tax with the provision for income taxes follow. The foreign components of income from continuing operations disclosed in the following table exclude any allocations of certain corporate expenses incurred in the U.S.
(In millions) |  | 2019 |  |  | 2018 |  |  | 2017 |
Income (loss) from continuing operations before income taxes |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | (76 | ) |  | $ | (214 | ) |  | $ | (433 | )
Foreign |  |  | 146 |  |  |  | 225 |  |  |  | 237 |
Income (loss) from continuing operations before income taxes |  | $ | 70 |  |  | $ | 11 |  |  | $ | (196 | )
Income taxes computed at U.S. statutory rate (a) |  | $ | 15 |  |  | $ | 3 |  |  | $ | (69 | )
Increase (decrease) in amount computed resulting from |  |  |  |  |  |  |  |  |  |  |  |
Tax reform (b) |  |  | 29 |  |  |  | 44 |  |  |  | — |
Uncertain tax positions |  |  | 10 |  |  |  | (13 | ) |  |  | 12 |
Foreign dividends, deemed inclusions and other restructuring (c) |  |  | 11 |  |  |  | 48 |  |  |  | 125 |
Foreign tax credits |  |  | (17 | ) |  |  | (54 | ) |  |  | (29 | )
Valuation allowance changes (d) |  |  | 14 |  |  |  | (2 | ) |  |  | (3 | )
Research and development credits |  |  | (6 | ) |  |  | (5 | ) |  |  | (6 | )
State taxes (e) |  |  | (5 | ) |  |  | (3 | ) |  |  | (16 | )
International rate differential |  |  | (30 | ) |  |  | (50 | ) |  |  | (57 | )
Other items (f) |  |  | 25 |  |  |  | 24 |  |  |  | 27 |
Income tax expense (benefit) |  | $ | 46 |  |  | $ | (8 | ) |  | $ | (16 | )
(a) | The domestic tax rates are 35% for 2017 and 24.5% for 2018. For 2019 and forward, the domestic tax rate is expected to be 21%.
(b) | 2019 includes an expense of $29 million related to a return to provision adjustment for transition tax. 2018 includes expense of $187 million related to the one-time transition tax, a benefit of $139 million related to the deferred rate change and a benefit of $4 million related to tax reform in a foreign jurisdiction. Foreign tax credits of $46 million related to the transition tax were included within the foreign tax credits caption. Other items related to the transition tax or other U.S. tax reform offset to immaterial amounts within the state taxes, uncertain tax positions and other captions and net to zero in the aggregate. In summary, total U.S. tax reform expense was $2 million related to transition tax expense of $187 million, a deferred rate change benefit of $139 million and a foreign tax credit benefit of $46 million. Ashland completed its calculation of the total post-1986 E&P for these foreign subsidiaries and recorded an additional unfavorable $29 million adjustment in 2019.
(c) | 2018 includes a gain recognition of $6 million, deemed inclusions of $13 million and tax restructuring costs of $23 million.
(d) | 2019 includes $5 million related to state tax NOL’s and $9 million related to a foreign jurisdiction. 2018 includes a $5 million benefit for the release of a foreign tax credit valuation allowance; 2017 includes $25 million of benefit for the release of a foreign tax credit valuation allowance and $22 million of expense for state, foreign and domestic federal deferred tax asset valuation allowances net of a NOL write-off offset.
(e) | 2018 includes a $27 million tax benefit for a valuation reserve release against state net operating losses and $26 million of tax expense for state tax rate changes; 2017 includes $6 million of benefit for state tax rate changes primarily related to the final distribution of Valvoline.
(f) | 2019 includes $19 million primarily related to GILTI permanent adjustments. 2018 includes $22 million related to foreign withholding taxes; 2017 includes $7 million of expense related to foreign withholding taxes, $5 million of expense for the write-off of a prepaid asset related to an intercompany transaction with a Valvoline legal entity, $4 million of expense for non-deductible transaction costs primarily related to the Valvoline spin-off and $6 million of benefit for certain other domestic permanent items.
The 2019 effective tax rate was impacted by jurisdictional income mix, restructuring activities, and the impact of U.S. tax reform. The 2018 effective tax rate was impacted by jurisdictional income mix and restructuring activities, while U.S. tax reform and other items netted together to have an insignificant tax impact. The 2017 effective tax rate was impacted by jurisdictional income mix, tax expense related to deemed dividend inclusions and a tax benefit for the reversal of a valuation allowance related to the utilization of foreign tax credits. Unrecognized tax benefits U.S. GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires Ashland to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires Ashland to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50% likelihood of being realized. Ashland had $165 million and $164 million of unrecognized tax benefits at September 30, 2019 and 2018, respectively. As of September 30, 2019, the total amount of unrecognized tax benefits that, if recognized, would affect the tax rate for continuing and discontinued operations was $155 million. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits would not have an impact on the effective tax rate. Ashland recognizes interest and penalties related to uncertain tax positions as a component of income tax expense (benefit) in the Statements of Consolidated Comprehensive Income. Such interest and penalties totaled a $5 million expense in 2019, $1 million benefit in 2018 and $3 million expense in 2017. Ashland had $26 million and $25 million in interest and penalties related to unrecognized tax benefits accrued as of September 30, 2019 and 2018, respectively. Changes in unrecognized tax benefits were as follows:
(In millions) |  |  |  |
Balance at September 30, 2017 (a) |  | $ | 194 |
Increases related to positions taken on items from prior years |  |  | 5 |
Decreases related to positions taken on items from prior years |  |  | (40 | )
Increases related to positions taken in the current year |  |  | 14 |
Lapse of statute of limitations |  |  | (5 | )
Settlement of uncertain tax positions with tax authorities |  |  | (4 | )
Balance at September 30, 2018 (a) |  |  | 164 |
Increases related to positions taken on items from prior years |  |  | 1 |
Decreases related to positions taken on items from prior years |  |  | (5 | )
Increases related to positions taken in the current year |  |  | 21 |
Lapse of statute of limitations |  |  | (10 | )
Disposition of Composites and Marl facility |  |  | (6 | )
Balance at September 30, 2019 |  | $ | 165 |
(a) | Ashland has indemnity receivables from Valvoline and Pharmachem for $32 million and $39 million of the gross unrecognized tax benefits at September 30, 2019 and 2018, respectively.
From a combination of statute expirations and audit settlements in the next twelve months, Ashland expects a decrease in the amount of accrual for uncertain tax positions of between $1 million and $2 million for continuing operations. For the remaining balance as of September 30, 2019, it is reasonably possible that there could be material changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues, reassessment of existing uncertain tax positions or the expiration of applicable statute of limitations; however, Ashland is not able to estimate the impact of these items at this time. Ashland or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Foreign taxing jurisdictions significant to Ashland include Brazil, Canada, China, Germany, Mexico, Netherlands, Spain, Switzerland and United Kingdom. Ashland is subject to U.S. federal income tax examinations by tax authorities for periods after September 30, 2013 and U.S. state income tax examinations by tax authorities for periods after September 30, 2010. With respect to countries outside of the United States, with certain exceptions, Ashland’s foreign subsidiaries are subject to income tax audits for years after 2008.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration