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Income Taxes | 3 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes |
14. Income Taxes
In calculating the provision for income taxes, Adient uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the actual effective tax rate is adjusted, as appropriate, based on changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. For the three months ended December 31, 2025, Adient’s income tax expense was $42 million equating to an effective tax rate of 102%. The three month income tax expense was higher than the Irish statutory rate of 12.5% primarily due to the establishment of uncertain tax positions associated with a foreign tax audit settlement expected to be finalized in fiscal 2026 and the inability to record a tax benefit for losses in jurisdictions with valuation allowances, partially offset by tax benefits related to audit closures and statute expirations. For the three months ended December 31, 2024, Adient’s income tax expense was $22 million equating to an effective tax rate of 47%. The three month income tax expense was higher than the Irish statutory rate of 12.5% primarily due to the inability to record a tax benefit for losses in jurisdictions with valuation allowances and tax expense related to foreign exchange remeasurements of tax balances primarily in Mexico, partially offset by tax benefits from the release of uncertain tax positions due to statute expirations. Valuation Allowances As a result of Adient's first quarter fiscal 2026 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined that no changes to valuation allowances were required. 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 reasonable 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. Uncertain Tax Positions At December 31, 2025, Adient had gross tax effected unrecognized tax benefits of $405 million. If recognized, $127 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at December 31, 2025 was approximately $33 million (net of tax benefit). The interest and penalties accrued for the three months ended December 31, 2025 was $14 million, which includes $12 million of interest and penalties on uncertain tax positions related to a foreign tax audit settlement that was initiated in the first quarter of fiscal 2026. As a result of initiating the foreign tax audit settlement, Adient also recognized tax expense (excluding interest and penalties) of $10 million during the three months ended December 31, 2025. Subsequent to December 31, 2025, there was a partial settlement of this foreign tax audit, with final settlement expected during the second quarter of fiscal 2026. The final settlement is not expected to result in a material change to amounts recorded at December 31, 2025. Additionally, during the three months ended December 31, 2025, Adient recognized a tax benefit of $10 million due to the release of uncertain tax positions due to audit closures and statute expirations. At September 30, 2025, Adient had gross tax effected unrecognized tax benefits of $404 million. If recognized, $114 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest at September 30, 2025 was approximately $21 million (net of tax benefit). The interest and penalties accrued for the three months ended December 31, 2024 was $1 million. Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. Other The Organization for Economic Cooperation and Development’s Pillar Two initiative, which introduced a 15% global minimum tax applied on a country by country basis, was applicable for Adient beginning in fiscal 2025. Adient has estimated the annual effect of these rules and the impact on Adient’s effective tax rate is not material. Adient will continue to monitor and evaluate new legislation and guidance related to Pillar Two, including the OECD’s administrative guidance published on January 5, 2026, which could change our current assessment. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740 requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted. The OBBBA did not have a material impact on Adient’s consolidated financial statements. Adient will continue to evaluate the OBBBA and related guidance.

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