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Income Taxes (Tables)

12 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Summary of Provision for Income Taxes Related to Continuing Operations

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	)

Summary of Temporary Differences of Deferred Tax Assets and Liabilities

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.

Summary of Income from Continuing Operations Before Income Taxes and Reconciliation of Provision for Income Taxes

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.

Summary of Changes in Unrecognized Tax Benefits

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.

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Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

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Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.

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