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Income Taxes | 12 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | 16. Income Taxes Consolidated income (loss) before income taxes and noncontrolling interests for the years ended September 30, 2024, 2023, and 2022 is as follows:
|  | Year Ended September 30,
(in millions) |  | 2024 |  | 2023 |  | 2022
Ireland |  | $ | (13) |  |  | $ | (1) |  |  | $ | (2) |
United States |  | (361) |  |  | (178) |  |  | (595) |
Other Foreign |  | 507 |  |  | 474 |  |  | 651 |
Income before income taxes and noncontrolling interests |  | $ | 133 |  |  | $ | 295 |  |  | $ | 54 |
The components of the provision (benefit) for income taxes are as follows:
|  | Year Ended September 30,
(in millions) |  | 2024 |  | 2023 |  | 2022
Current |  |  |  |  |  |
Ireland |  | $ | — |  |  | $ | — |  |  | $ | (1) |
US - Federal and State |  | 5 |  |  | 4 |  |  | 6 |
Other Foreign |  | 28 |  |  | 120 |  |  | 84 |
|  | 33 |  |  | 124 |  |  | 89 |
Deferred |  |  |  |  |  |
Ireland |  | — |  |  | — |  |  | 1 |
US - Federal and State |  | — |  |  | 1 |  |  | (1) |
Other Foreign |  | (1) |  |  | (125) |  |  | 5 |
|  | (1) |  |  | (124) |  |  | 5 |
Income tax provision |  | $ | 32 |  |  | $ | — |  |  | $ | 94 |
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 Adient’s 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) |  | 2024 |  | 2023 |  | 2022
Tax expense at Ireland statutory rate |  | $ | 17 |  |  | $ | 37 |  |  | $ | 7 |
State and local income taxes, net of federal benefit |  | (15) |  |  | (5) |  |  | (38) |
Foreign tax rate differential |  | 9 |  |  | 22 |  |  | (1) |
Notional interest deduction |  | (6) |  |  | (6) |  |  | (6) |
Credits and incentives |  | (12) |  |  | (7) |  |  | (15) |
Repatriation of foreign earnings |  | 18 |  |  | 24 |  |  | 24 |
Foreign exchange |  | 17 |  |  | (7) |  |  | (2) |
Impact of tax rate changes |  | (1) |  |  | — |  |  | (3) |
Audit settlements and change in uncertain tax positions |  | (43) |  |  | (8) |  |  | (2) |
Change in valuation allowance |  | 90 |  |  | (61) |  |  | 94 |
Tax adjustments to value of investments |  | (38) |  |  | — |  |  | — |
Tax impact of corporate equity and business restructuring transactions |  | 1 |  |  | 1 |  |  | 30 |
Other |  | (5) |  |  | 10 |  |  | 6 |
Income tax provision |  | $ | 32 |  |  | $ | — |  |  | $ | 94 |
The income tax expense was higher than the Irish statutory rate of 12.5% for fiscal 2024 due to the inability to record a tax benefit for losses in jurisdictions with valuation allowances, the repatriation of foreign earnings, tax expense related to foreign exchange remeasurements of tax balances primarily in Mexico, and tax expense from the establishment of valuation allowances at certain subsidiaries, partially offset by tax benefits from the release of uncertain tax positions due to audit closures and from the release of valuation allowances at certain subsidiaries. No items included in the other category are individually, or when appropriately aggregated, significant. The income tax expense was lower than the Irish statutory rate of 12.5% for fiscal 2023 primarily due to the release of valuation allowances in Mexico, partially offset by the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the repatriation of foreign earnings, and foreign tax rate differentials. 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 2022 primarily due to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the establishment of valuation allowances in certain jurisdictions, and the repatriation of foreign earnings, partially offset by tax benefits related to the release of valuation allowances in certain jurisdictions. No items included in the other category are individually, or when appropriately aggregated, significant. Adient’s foreign tax rate differential primarily comprises two components. First is the difference in foreign tax rates from the Irish statutory tax rate that will fluctuate with the mix of income and losses in multiple jurisdictions with higher or lower statutory tax rates. Second is the elimination of the effects, at the Irish statutory tax rate, on the amount of income reported for nonconsolidated partially-owned affiliates whose corresponding income tax expense is already netted against equity income on the consolidated statements of income and reflected in income (loss) before income taxes. During fiscal 2024, 2023 and 2022, significant income and loss jurisdictions include Brazil, China, Germany, Luxembourg, Mexico, Thailand, the United Kingdom, and the United States, with federal statutory tax rates ranging between 16% and 34%, which are all above the Irish statutory rate of 12.5%. Due to the significant jurisdictions in which it operates having statutory tax rates higher than the Irish statutory rate of 12.5%, Adient generally expects that foreign tax rate differentials will continue to result in net expense when its consolidated subsidiaries generate net pretax income and overall pretax income does not consist primarily of equity income from nonconsolidated partially-owned affiliates. In periods in which Adient’s consolidated subsidiaries generate net losses, or overall pretax income consists primarily of equity income reported from nonconsolidated partially-owned affiliates, Adient generally expects that foreign tax rate differentials will result in a net benefit. During fiscal 2024 and 2023, Adient’s pretax income was primarily generated by Adient’s consolidated subsidiaries, resulting in a net foreign tax rate differential expense. During fiscal 2022, Adient’s pretax income consisted primarily of income of nonconsolidated partially-owned affiliates whose corresponding income tax expense is netted against equity income on the consolidated statements of income, with the elimination of the effects at the Irish statutory tax rate resulting in a net foreign tax rate differential benefit. For fiscal 2024, the foreign tax differential expense of $9 million includes $20 million related to the higher tax expense resulting from the tax rate differential primarily from the mix of income and losses in the significant jurisdictions listed above with higher statutory tax rates than Ireland, which was partially offset by $11 million related to the elimination of the tax effects of the equity income from nonconsolidated partially-owned affiliates whose corresponding income tax expense is already netted in income before income taxes. For fiscal 2023, the foreign tax differential expense of $22 million includes $33 million related to the higher tax expense resulting from the tax rate differential primarily from the mix of income and losses in the significant jurisdictions listed above with higher statutory tax rates than Ireland, which was partially offset by $11 million related to the elimination of the tax effects of the equity income from nonconsolidated partially-owned affiliates whose corresponding income tax expense is already netted in income before income taxes. For fiscal 2022, the foreign tax differential benefit of $1 million includes $9 million related to the elimination of the tax effects of the equity income from nonconsolidated partially-owned affiliates, partially offset by $8 million related to the higher tax expense resulting from tax rate differential primarily related to the mix of income and losses in Adient’s consolidated subsidiaries with tax rates higher than Ireland. Deferred taxes are classified in the consolidated statements of financial position as follows:
|  | September 30,
(in millions) |  | 2024 |  | 2023
Other noncurrent assets |  | $ | 245 |  |  | $ | 253 |
Other noncurrent liabilities |  | (191) |  |  | (206) |
Net deferred tax asset |  | $ | 54 |  |  | $ | 47 |
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities included:
|  | September 30,
(in millions) |  | 2024 |  | 2023
Deferred tax assets: |  |  |  |
Accrued expenses and reserves |  | $ | 123 |  |  | $ | 135 |
Employee and retiree benefits |  | 24 |  |  | 25 |
Net operating loss and other carryforwards |  | 1,400 |  |  | 1,293 |
Property, plant and equipment |  | 114 |  |  | 113 |
Intangible assets |  | 112 |  |  | 132 |
Operating lease liabilities |  | 57 |  |  | 55 |
Research and development |  | 102 |  |  | 66 |
|  | 1,932 |  |  | 1,819 |
Valuation allowances |  | (1,769) |  |  | (1,655) |
|  | 163 |  |  | 164 |
Deferred tax liabilities: |  |  |  |
Unremitted earnings of foreign subsidiaries |  | 39 |  |  | 38 |
Indirect tax credits |  | — |  |  | 10 |
Operating lease right-of-use assets |  | 57 |  |  | 55 |
Other |  | 13 |  |  | 14 |
|  | 109 |  |  | 117 |
Net deferred tax asset |  | $ | 54 |  |  | $ | 47 |
At September 30, 2024, Adient had available net operating loss carryforwards of approximately $4.7 billion which are available to reduce future tax liabilities. Net operating loss carryforwards of $2.4 billion will expire at various dates between 2025 and 2044, with the remainder having an indefinite carryforward period. Net operating loss carryforwards of $3.4 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. Given current earnings and anticipated future earnings at certain subsidiaries, Adient believes that there is a possibility that sufficient positive evidence may become available that would allow the release of all, or a portion of, valuation allowances at certain subsidiaries within the next twelve months. A release of valuation allowances, if any, would result in the recognition of certain deferred tax assets which could generate a material income tax benefit for the period in which such release is recorded. As a result of Adient's fiscal 2024 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 certain deferred tax assets would be realizable and recorded an income tax benefit of $14 million in China, $8 million in Mexico, $7 million in France, and $6 million in Japan to release valuation allowances. In addition, Adient determined it was necessary to establish valuation allowances on certain deferred tax assets in Poland and Mexico, recording tax expense of $14 million and $5 million, respectively. 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. During fiscal 2024, the valuation allowance in Luxembourg increased by $38 million related to tax adjustments to the value of certain investments, with an offsetting increase in net operating loss carryforwards and no net impact to tax expense. As a result of Adient's fiscal 2023 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 certain deferred tax assets in Mexico would be realizable and recorded an income tax benefit of $114 million to release valuation allowances. In addition, Adient determined it was necessary to release valuation allowances and establish valuation allowances in other jurisdictions that did not have a material impact on Adient’s financial statements. As a result of Adient's fiscal 2022 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 certain deferred tax assets in Canada, Japan, and other jurisdictions would not be realized and recorded income tax expense of $12 million, $3 million and $3 million, respectively, to establish valuation allowances. Additionally, Adient determined it was more likely than not that deferred tax assets in the Czech Republic and other jurisdictions would be realizable and recorded income tax benefit of $11 million and $2 million, respectively, to release valuation allowances. Adient is subject to income taxes in Ireland, the U.S. and other foreign jurisdictions. With few exceptions, Adient is no longer subject to income tax examination by U.S. federal, state or local tax authorities or by non-U.S. tax authorities for years before 2014. 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, 2024, 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, 2024, 2023 and 2022, Adient had gross tax effected unrecognized tax benefits of $422 million, $527 million, and $499 million, respectively. If recognized, $106 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest for the years ended September 30, 2024, 2023 and 2022, was approximately $21 million, $31 million and $22 million, respectively (net of tax benefit). Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. During fiscal 2024, Adient settled audits in various jurisdictions that resulted in a $115 million reduction to its unrecognized tax benefits, of which $63 million was recorded as a tax benefit. The remaining difference primarily offset other changes in deferred tax balances. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | Year Ended September 30,
(in millions) |  | 2024 |  | 2023 |  | 2022
Beginning balance |  | $ | 527 |  |  | $ | 499 |  |  | $ | 499 |
Additions for tax positions related to the current year |  | 6 |  |  | 2 |  |  | 62 |
Additions for tax positions of prior years |  | 18 |  |  | 50 |  |  | 2 |
Reductions for tax positions of prior years |  | (9) |  |  | (5) |  |  | (52) |
Settlements with taxing authorities |  | (115) |  |  | (11) |  |  | (3) |
Statute closings |  | (5) |  |  | (8) |  |  | (9) |
Ending balance |  | $ | 422 |  |  | $ | 527 |  |  | $ | 499 |
During the next twelve months, it is possible that tax audit resolutions or applicable statute of limitation lapses could result in a significant change in the balance of gross unrecognized tax benefits. Given the number of years, jurisdictions and positions subject to examination, Adient is unable to estimate the full range of possible adjustments to the balance of unrecognized tax benefits. Adient has recorded a deferred tax liability of approximately $39 million as of September 30, 2024 on the undistributed earnings of certain consolidated and unconsolidated foreign affiliates for which Adient does not have an indefinite reinvestment assertion. Adient has not provided for deferred taxes on the remainder of undistributed earnings from consolidated foreign affiliates because such earnings should not give rise to additional tax liabilities upon repatriation or are considered to be indefinitely reinvested. 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 years ended September 30, 2024, 2023 and 2022 were $96 million, $94 million and $77 million, respectively. Impacts of Tax Legislation and Change in Statutory Tax Rates On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 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 Adient. During fiscal years 2024, 2023, and 2022, 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 During fiscal 2022, Adient recognized a one-time gain of $32 million associated with the retrospective recovery of indirect tax credits in Brazil resulting from Adient’s prioritization of those credits, resulting in net tax expense of $4 million.

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