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Income Taxes | 12 Months Ended
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Sep. 30, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 17. Income Taxes Consolidated income (loss) before income taxes and noncontrolling interests for the years ended September 30, 2020, 2019, and 2018 is as follows:
|  | Year Ended September 30,
(in millions) |  | 2020 |  | 2019 |  | 2018
Ireland |  | $ | (3) |  |  | $ | (1) |  |  | $ | 4 |
United States |  | (111) |  |  | (170) |  |  | (324) |
Other Foreign |  | (315) |  |  | 173 |  |  | (801) |
Income before income taxes and noncontrolling interests |  | $ | (429) |  |  | $ | 2 |  |  | $ | (1,121) |
The components of the provision (benefit) for income taxes are as follows:
|  | Year Ended September 30,
(in millions) |  | 2020 |  | 2019 |  | 2018
Current |  |  |  |  |  |
Ireland |  | $ | — |  |  | $ | — |  |  | $ | 1 |
US - Federal and State |  | (1) |  |  | 4 |  |  | 7 |
Other Foreign |  | 91 |  |  | 118 |  |  | 128 |
|  | 90 |  |  | 122 |  |  | 136 |
Deferred |  |  |  |  |  |
Ireland |  | — |  |  | — |  |  | — |
US - Federal and State |  | — |  |  | 1 |  |  | 417 |
Other Foreign |  | (33) |  |  | 287 |  |  | (73) |
|  | (33) |  |  | 288 |  |  | 344 |
Income tax provision |  | $ | 57 |  |  | $ | 410 |  |  | $ | 480 |
The significant components of Adient's income tax provision are summarized in the following tables. These amounts do not include the impact of income tax expense related to our nonconsolidated partially-owned affiliates, which is netted against equity income on the consolidated statements of income (loss). The reconciliation between the Irish statutory income tax rate, and Adient’s effective tax rate is as follows:
|  | Year Ended September 30,
(in millions) |  | 2020 |  | 2019 |  | 2018
Tax expense at Ireland statutory rate |  | $ | (54) |  |  | $ | — |  |  | $ | (140) |
State and local income taxes, net of federal benefit |  | (30) |  |  | (41) |  |  | (60) |
Foreign tax rate differential |  | (127) |  |  | (109) |  |  | (146) |
Notional interest deduction |  | (44) |  |  | (63) |  |  | (66) |
Credits and incentives |  | (7) |  |  | (9) |  |  | (13) |
Goodwill impairment |  | 9 |  |  | — |  |  | (21) |
Repatriation of foreign earnings |  | 18 |  |  | 31 |  |  | 36 |
Foreign exchange |  | (1) |  |  | 2 |  |  | 3 |
Impact of enacted tax rate changes |  | (3) |  |  | (5) |  |  | 23 |
Impact of U.S. tax reform |  | — |  |  | — |  |  | 210 |
Change in uncertain tax positions |  | 56 |  |  | 107 |  |  | 97 |
Change in valuation allowance |  | 332 |  |  | 503 |  |  | 554 |
Impairment of subsidiaries |  | (24) |  |  | (3) |  |  | — |
Tax impact of corporate equity transactions |  | (77) |  |  | — |  |  | — |
Other |  | 9 |  |  | (3) |  |  | 3 |
Income tax provision |  | $ | 57 |  |  | $ | 410 |  |  | $ | 480 |
The income tax expense was higher than the Irish statutory rate of 12.5% for fiscal 2020 primarily due to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the repatriation of foreign earnings, and changes in uncertain tax positions, partially offset by the tax benefits related to the impairment and sale of Adient’s YFAI investment, sale of Adient’s automotive fabrics manufacturing business, and impairment charges recorded in the Asia segment. No items included in the other category are individually, or when appropriately aggregated, significant. The income tax expense was higher than the Irish statutory rate of 12.5% for fiscal 2019 primarily due to the recognition of valuation allowances in Luxembourg, Poland, and the United Kingdom, the repatriation of foreign earnings, changes in uncertain tax positions and the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances. No items included in the other category are individually, or when appropriately aggregated, significant. The effective rate was lower than the Irish statutory rate of 12.5% for fiscal 2018 primarily due to the charge to recognize the impact of U.S. tax reform legislation, repatriation of foreign earnings, and changes in uncertain tax positions and valuation allowances, partially offset by benefits from global tax planning, notional interest deductions, foreign tax rate differentials, and impairment deductions. No items included in the other category are individually, or when appropriately aggregated, significant. The foreign tax rate differential benefit for fiscal 2020 is primarily driven by losses earned in jurisdictions where the statutory rate is greater than 12.5% and by the pretax book income of nonconsolidated partially-owned affiliates whose corresponding income tax expense is netted against equity income on the consolidated statements of income. The foreign tax rate differential benefit for fiscal 2019 is primarily driven by losses earned in jurisdictions where the statutory rate is greater than 12.5% and by the pretax book income of nonconsolidated partially-owned affiliates whose corresponding income tax expense is netted against equity income on the consolidated statements of income. The foreign tax rate differential benefit for fiscal 2018 was primarily driven by losses earned in jurisdictions where the statutory rate is greater than 12.5%. Deferred taxes are classified in the consolidated statements of financial position as follows:
|  | September 30,
(in millions) |  | 2020 |  | 2019
Other noncurrent assets |  | $ | 178 |  |  | $ | 199 |
Other noncurrent liabilities |  | (175) |  |  | (206) |
Net deferred tax asset/(liability) |  | $ | 3 |  |  | $ | (7) |
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities included:
|  | September 30,
(in millions) |  | 2020 |  | 2019
Deferred tax assets: |  |  |  |
Accrued expenses and reserves |  | $ | 115 |  |  | $ | 73 |
Employee and retiree benefits |  | 53 |  |  | 43 |
Net operating loss and other credit carryforwards |  | 1,072 |  |  | 751 |
Property, plant and equipment |  | 163 |  |  | 161 |
Intangible assets |  | 257 |  |  | 308 |
Operating lease liabilities |  | 80 |  |  | — |
Foreign currency adjustments |  | 17 |  |  | 2 |
Research and development |  | 20 |  |  | 16 |
Other |  | 3 |  |  | 5 |
|  | 1,780 |  |  | 1,359 |
Valuation allowances |  | (1,656) |  |  | (1,304) |
|  | 124 |  |  | 55 |
Deferred tax liabilities: |  |  |  |
Unremitted earnings of foreign subsidiaries |  | 41 |  |  | 62 |
Operating lease right-of-use assets |  | 80 |  |  | — |
|  | 121 |  |  | 62 |
Net deferred tax asset/(liability) |  | $ | 3 |  |  | $ | (7) |
At September 30, 2020, Adient had available net operating loss carryforwards of approximately $4.0 billion which are available to reduce future tax liabilities. Net operating loss carryforwards of $2.6 billion will expire at various dates between 2021 and 2040, with the remainder having an indefinite carryforward period. Net operating loss carryforwards of $2.7 billion are offset by a valuation allowance. Adient reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred tax asset are considered, along with any other positive or negative evidence. All of the factors that Adient considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment. Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary. As a result of Adient's fiscal 2020 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined it was more likely than not that deferred tax assets in certain jurisdictions would not be realized. These valuation allowances did not have a material impact on the consolidated financial statements. Adient continues to record valuation allowances on certain deferred tax assets in Germany, Hungary, Luxembourg, Mexico, Poland, Spain, the United Kingdom, the U.S. and other jurisdictions as it remains more likely than not that they will not be realized. As a result of Adient's fiscal 2019 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the external debt refinancing, the related incremental net financing costs, and the restructuring of the internal financing which occurred in the third quarter of fiscal 2019 and including the long-lived asset impairment recorded in the second quarter of fiscal 2019), Adient determined it was more likely than not that deferred tax assets in Luxembourg (Q3), the United Kingdom (Q3) and certain Poland entities (Q2) would not be realized and recorded income tax expense of $229 million, $25 million and $43 million, respectively, to establish valuation allowances. As a result of Adient's fiscal 2018 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the seat structure and mechanism operations long-lived asset impairment recorded in the fourth quarter of fiscal 2018), Adient determined that it was more likely than not that deferred tax assets within the following jurisdictions would not be realized and recorded net valuation allowances as income tax expense in the fourth quarter of fiscal 2018: Belgium ($12 million), Canada ($6 million), Germany ($175 million), Hungary ($14 million), Mexico ($117 million), Poland ($8 million), Romania ($9 million), and the U.S. ($281 million). Germany, Hungary, Mexico, Poland, Romania, and the U.S. cumulative loss positions were all adversely impacted by the seat structure and mechanism operations performance issues and resulting long-lived asset impairment. In addition, as a result of Adient's fiscal 2018 analysis, Adient determined that it was more likely than not that deferred tax assets within Brazil would be realized. Therefore, Adient released $76 million of valuation allowance as an income tax benefit in the fourth quarter of fiscal 2018. Adient is subject to income taxes in Ireland, the U.S. and other foreign jurisdictions. The following table provides the earliest open tax year by major jurisdiction for which Adient could be subject to income tax examination by the tax authorities:
Tax Jurisdiction |  | Earliest Year Open
Brazil |  | 2014
China |  | 2011
Czech Republic |  | 2012
France |  | 2017
Germany |  | 2016
Hong Kong |  | 2014
Japan |  | 2015
Luxembourg |  | 2014
Mexico |  | 2015
Poland |  | 2010
Spain |  | 2013
United Kingdom |  | 2014
United States |  | 2017
Adient regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. For the year ended September 30, 2020, Adient believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial statements. However, the final determination with respect to tax audits and any related litigation could be materially different from Adient’s estimates. For the years ended September 30, 2020, 2019 and 2018, Adient had gross tax effected unrecognized tax benefits of $483 million, $414 million, and $288 million, respectively. If recognized, $133 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest for the years ended September 30, 2020, 2019 and 2018, was approximately $15 million, $10 million and $5 million, respectively (net of tax benefit). Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | Year Ended September 30,
(in millions) |  | 2020 |  | 2019 |  | 2018
Beginning balance |  | $ | 414 |  |  | $ | 288 |  |  | $ | 193 |
Additions for tax positions related to the current year |  | 96 |  |  | 108 |  |  | 110 |
Additions for tax positions of prior years |  | 17 |  |  | 45 |  |  | 12 |
Reductions for tax positions of prior years |  | (38) |  |  | (22) |  |  | (21) |
Settlements with taxing authorities |  | (4) |  |  | — |  |  | — |
Statute closings |  | (2) |  |  | (5) |  |  | (6) |
Ending balance |  | $ | 483 |  |  | $ | 414 |  |  | $ | 288 |
During the next twelve months, it is reasonably possible that tax audit resolutions or applicable statute of limitation lapses could reduce the unrecognized tax benefits and income tax expense. Adient does not anticipate that this will result in a material impact to its consolidated financial statements. Adient has $16.8 billion of undistributed foreign earnings of which $409 million is deemed permanently reinvested and no deferred taxes have been provided on such earnings. It is not practicable to determine the unrecognized deferred tax liability on these earnings because the actual tax liability, if any, is dependent on circumstances existing when remittance occurs. Income taxes paid for the fiscal year ended September 30, 2020 were $98 million. Income taxes paid for the fiscal year ended September 30, 2019 were $102 million. Income taxes paid for the fiscal year ended September 30, 2018 were $139 million. Impacts of Tax Legislation and Change in Statutory Tax Rates On March 27, 2020, the House passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief bill, and the president signed the legislation into law. Adient does not expect the provisions of the legislation to have a significant impact on the effective tax rate or the income tax payable and deferred income tax positions of the Company. During the fourth quarter of 2019, certain deferred tax liabilities were remeasured to reflect a reduction in withholding tax rate on the earnings of our nonconsolidated partially owned affiliates resulting in a benefit of $9 million. During the third quarter of fiscal 2019, Luxembourg enacted legislation reducing the nominal corporate tax rate to 17% from 18%. For Adient, this reduced its aggregate income tax rate to 24.9% from 26.0% and applies retroactively to the fiscal 2019 tax year. As a result of the law change, Adient recorded income tax expense of $10 million related to the write down of deferred tax assets. During the first quarter of fiscal 2019, GAAS (a subsidiary of Adient in China) was approved for High and New Tech Enterprise status for the three-year period of 2018 to 2020, thereby reducing their tax rate from 25% to 15%. As a result, a $7 million income tax benefit was recorded on the reduction of deferred tax liabilities and a reduction of 2018 calendar year income taxes. On December 22, 2017, the Act was signed and enacted into law, and is effective for tax years beginning on or after January 1, 2018, with the exception of certain provisions. As a fiscal year taxpayer, Adient was not subject to the majority of the provisions until fiscal year 2019, however the statutory tax rate reduction was effective January 1, 2018. The Act reduced the U.S. corporate tax rate from 35% to 21%. Adient’s fiscal 2018 income tax expense reflects the benefit from the reduced rate of 24.5% resulting from the application of Internal Revenue Code, Section 15 which provides for a proration of the newly enacted rate during that fiscal year. This benefit was offset by a non-cash tax expense of $106 million related to the remeasurement of Adient’s net deferred tax assets at the lower statutory rate, a non-cash estimated tax expense of $100 million related to recording a valuation allowance to reflect the reduced benefit Adient expects to realize as a result of being subject to the Base Erosion and Anti-avoidance Tax ("BEAT"), and tax expense of $4 million related to the transition tax imposed on previously untaxed earnings and profits. During the first quarter of fiscal 2019, Adient completed its accounting for the Act BEAT valuation allowance resulting in no change to the $100 million income tax impact estimated in fiscal 2018. During fiscal years 2020, 2019, and 2018, other tax legislation was adopted in various jurisdictions. These law changes did not have a material impact on the consolidated financial statements. Tax Impact of One-Time Items In fiscal 2020, Adient committed to a restructuring plan (“2020 Plan”) of $205 million. Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The restructuring costs generated a $6 million tax benefit, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions. During the fourth quarter of fiscal 2020, Adient sold its investment in YFAI and its automotive fabrics manufacturing business. Refer to Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information. The tax benefits associated with the sales of the YFAI investment and automotive fabrics manufacturing business were $12 million and $3 million, respectively. During the third quarter of fiscal 2020, an impairment charge of $27 million was recorded in the Asia segment related to customer relationship intangible assets. Refer to Note 6, “Goodwill and Other Intangible Assets,” of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $5 million. During the first quarter of fiscal 2020, Adient recognized a pre-tax non-cash impairment of $216 million in equity income related to Adient's YFAI investment. Refer to Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $4 million. An additional impairment of $6 million was recorded in the third quarter of fiscal 2020 related to this investment, with no additional tax benefit being recorded. In fiscal 2019, Adient committed to a significant restructuring plan (“2019 Plan”) and recorded a net $92 million of restructuring and impairment costs in the consolidated statements of income. Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The restructuring costs generated a $5 million tax benefit, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions. During the second quarter of fiscal 2019, Adient recognized a pre-tax impairment charge on long-lived assets of $66 million. Refer to Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $2 million, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions. In fiscal 2018, Adient committed to a significant restructuring plan (“2018 Plan”) and recorded a net $46 million of restructuring and impairment costs in the consolidated statements of income. Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The restructuring costs generated a $6 million tax benefit, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions. The disclosed tax benefit is prior to valuation allowances recorded during the fourth quarter of fiscal 2018. During the fourth quarter of fiscal 2018, Adient recognized a pre-tax impairment charge on long-lived assets of $787 million within the seat structure and mechanism operations. Refer to Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $185 million, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions. The disclosed tax benefit is prior to valuation allowances recorded during the fourth quarter of fiscal 2018. In addition during the fourth quarter of fiscal 2018, Adient recognized a pre-tax non-cash impairment charge of $358 million in equity income related to Adient’s YFAI investment balance within the Interiors segment. Refer to Note 19, "Nonconsolidated Partially-Owned Affiliates," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $36 million. During the third and fourth quarters of fiscal 2018, Adient recognized a net pre-tax impairment charge of $49 million related to assets classified as held for sale. Refer to Note 3, "Acquisitions and Divestitures," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $14 million. The disclosed tax benefit is prior to valuation allowances recorded during the fourth quarter of fiscal 2018. During the second quarter of fiscal 2018, Adient recognized a pre-tax goodwill impairment charge of $299 million related to the seat structure and mechanism operations. Refer to Note 6, "Goodwill and Other Intangible Assets," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the goodwill impairment charge was $20 million.

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- 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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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