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INCOME TAXES
 12 Months Ended
Sep. 30, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company’s income from continuing operations before income taxes includes the following components for the periods shown below (in millions):
Fiscal Years Ended September 30,
202620252024
United States$2,202 $2,119 $1,800 
Foreign562 510 415 
$2,764 $2,629 $2,215 
The Company’s income tax provision (benefit) on income from continuing operations consists of the following for the periods shown below (in millions):
Fiscal Years Ended September 30,
202620252024
Current
Federal$424 $420 $354 
State67 45 38 
Foreign117 100 98 
608 565 490 
Deferred
Federal23 (32)(6)
State6 1 7 
Foreign19 21 9 
48 (10)10 
$656 $555 $500 
The Company adopted ASU 2023-09 on a prospective basis beginning with the 2026 annual reporting period. Reconciliations between the U.S. federal statutory income tax rate and the effective income tax rate consist of the following for the period shown below (in millions):
Fiscal Year Ended September 30, 2026
AmountPercent
Federal statutory income tax rate $580 21.0 %
State and local income taxes, net of federal income tax effect (1)
59 2.1 %
Foreign tax effects31 1.1 %
Effect of changes in tax laws or rates enacted in the current period— — %
Effect of cross-border tax laws:
Foreign-derived intangibles income(47)(1.7)%
Other24 0.8 %
Tax credits(29)(1.0)%
Changes in valuation allowances:
Federal valuation allowance - 163j48 1.7 %
Nontaxable or nondeductible items(14)(0.5)%
Changes in unrecognized tax benefits(1)— %
Other adjustments5 0.2 %
Income tax expense and effective tax rate$656 23.7 %
(1)State taxes in California, Illinois, and New Jersey made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation from the statutory federal income tax rate to our effective income tax rate, applying ASC 740 prior to the adoption of ASU 2023-09, consists of the following for the periods shown below:
Fiscal Years Ended September 30,
20252024
Federal statutory income tax rate 21.0 %21.0 %
Changes in valuation allowances impacting results3.7 %4.0 %
State and local income taxes, net of federal benefit0.9 %1.3 %
Foreign-derived intangibles income(1.6)%(1.2)%
Stock-based compensation(2.9)%(3.6)%
Other—net— %1.1 %
Effective income tax rate21.1 %22.6 %
The components of the deferred taxes consist of the following (in millions):
September 30, 2026September 30, 2025
Deferred tax assets:
Interest expense limitation$479 $419 
Employee benefits150 131 
Inventories130 99 
Net operating losses58 59 
Capitalized research and development costs45 86 
Other1 14 
Total deferred tax assets863 808 
Valuation allowance(516)(456)
Net deferred tax assets347 352 
Deferred tax liabilities:
Intangible assets(1,042)(1,012)
Outside basis differences(194)— 
Property, plant and equipment(134)(99)
Total deferred tax liabilities(1,370)(1,111)
Total net deferred tax (liabilities) assets$(1,023)$(759)
At September 30, 2026, the Company has state net operating loss carryforwards of approximately $620 million, German net operating loss carryforwards of $87 million and United Kingdom net operating loss carryforwards of approximately $52 million that expire in various fiscal years from 2027 to 2046. The Company has U.S. and non-U.S. tax credit carryforwards of $3 million that expire beginning in fiscal year 2027.
The deferred tax assets for the interest expense limitation, net operating losses, and tax credit carryforwards are reduced by a valuation allowance for the amount of such assets that the Company believes will not be realized.
With limited exception, no provision has been made for income taxes on undistributed earnings of foreign subsidiaries at September 30, 2026, since it is the Company’s intention to indefinitely reinvest such undistributed earnings. The cash that is permanently reinvested is typically used to expand operations either organically or through acquisitions. It is not practicable to estimate the additional taxes that would be payable on the remittance of such earnings. We have provided for taxes in jurisdictions in which we are not considered indefinitely reinvested, however, such amounts are not significant.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2022. The Company is currently under examination for its federal income taxes in Canada for fiscal years 2018 through 2019, in France for fiscal years 2020 through 2022, and in Germany for fiscal years 2017 through 2024. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
The following schedule presents the changes in deferred tax asset valuation allowance as follows (in millions):
Fiscal Year Ended September 30,Balance at Beginning of PeriodCharged to Income Tax ExpenseBalance at End of Period
2026$456$60 $516 
2025318 138 456 
2024227 91 318 
Total income taxes paid, net of refunds, by material jurisdiction in accordance with the adoption of ASU 2023-09 consists of the following for the period shown below (in millions):
September 30, 2026
U.S. federal$420 
State and local58 
Foreign
Germany48 
Other73 
$599 
The Company does not have material unrecognized tax benefits as of September 30, 2026 and 2025. The Company classifies all income tax-related interest and penalties as income tax expense, which were not material for the fiscal years ended September 30, 2026 and 2025. As of September 30, 2026 and 2025, the Company’s accrual for interest and penalties was not material.