v3.26.3
Income Taxes
 12 Months Ended
Sep. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Selected income tax data (in millions):
202620252024
Components of Income before income taxes
United States$697 $280 $389 
Non-United States988 637 711 
Total$1,685 $917 $1,100 
Components of Income tax provision
Current
United States$159 $97 $78 
Non-United States179 169 128 
State and local25 16 14 
Total current363 282 220 
Deferred
United States(81)(87)(42)
Non-United States8 (11)(12)
State and local(12)(16)(14)
Total deferred(85)(114)(68)
Income tax provision$278 $168 $152 
Our final payment of $97 million related to the U.S. transition tax under the Tax Cuts and Jobs Act of 2017 (Tax Act) was paid in the second quarter of 2026 and was classified in Other current liabilities in the Consolidated Balance Sheet as of September 30, 2025. This amount was classified in Other liabilities in the Consolidated Balance Sheet as of September 30, 2024. Furthermore, taxes paid as a result of the transition tax was $78 million during the year ended September 30, 2025, and $58 million during the year ended September 30, 2024.
Effective Tax Rate Reconciliation
In accordance with the updated requirements of ASU 2023-09 for the year ended September 30, 2026, a reconciliation between the U.S. federal statutory rate and our effective tax rate was:
2026
AmountRate
US federal statutory income tax rate$354 21.0 %
Domestic federal
Tax credits
Research credits(21)(1.3)%
Foreign tax credit(28)(1.6)%
Nontaxable and nondeductible items 11 0.6 %
Cross-border tax laws
Foreign Inclusions7 0.4 %
Foreign Derived Intangible Income Deduction(11)(0.6)%
Share Based Compensation(20)(1.2)%
Sensia Joint Venture Dissolution(34)(2.0)%
Other (3)(0.2)%
Domestic state and local income taxes, net of federal effect (1)
12 0.7 %
Worldwide changes in unrecognized tax benefits(11)(0.7)%
Foreign tax effects
Singapore
Foreign rate differential(78)(4.6)%
BEPS Pillar Two Top up Tax46 2.7 %
Withholding Taxes25 1.5 %
Other1 0.1 %
Other Foreign Jurisdictions28 1.7 %
Total$278 16.5 %
(1) In 2026, state taxes in California, Illinois, Michigan, and Minnesota made up the majority (greater than 50 percent) of the tax effect of this category.
The reconciliation between the U.S. federal statutory rate and our effective tax rate was:
20252024
Statutory tax rate21.0 %21.0 %
State and local income taxes(0.1)0.2 
Non-United States taxes(3.8)(4.2)
Repatriation of foreign earnings1.0 0.9 
Foreign-derived intangible income(1.5)(0.7)
Settlements with taxing authorities and tax refund claims0.6 (1.2)
Change in valuation allowance (1)
3.6 0.5 
Share-based compensation(1.1)(0.2)
Research and development tax credit(2.9)(2.0)
Other1.5 (0.5)
Effective income tax rate18.3 %13.8 %
(1) During fiscal year 2025, the effective tax rate increased by 3.6 percent, resulting from a valuation allowance recorded on certain deferred tax assets of the Sensia joint venture and tax effects of the related impairment.
We operate in certain non-U.S. tax jurisdictions under government-sponsored tax incentive programs. The tax benefit attributable to these programs was $58 million ($0.52 per diluted share) in 2026, $45 million ($0.40 per diluted share) in 2025, and $36 million ($0.31 per diluted share) in 2024.
Deferred Taxes
The tax effects of temporary differences that give rise to our net deferred income tax assets (liabilities) consists of (in millions):
20262025
Deferred income tax assets
Compensation and benefits$34 $31 
Inventory26 24 
Returns, rebates, and incentives65 61 
Retirement benefits— 45 
Environmental remediation and other site-related costs23 25 
Share-based compensation21 23 
Other accruals and reserves491 470 
Net operating loss carryforwards14 62 
Tax credit carryforwards14 13 
Capital loss carryforwards72 16 
Other39 125 
Subtotal799 895 
Valuation allowance(21)(129)
Net deferred income tax assets778 766 
Deferred income tax liabilities
Property(62)(60)
Intangible assets(84)(105)
Retirement benefits(18)— 
Unremitted earnings of foreign subsidiaries(36)(45)
Deferred income tax liabilities(200)(210)
Total net deferred income tax assets$578 $556 
We provide for deferred taxes on the majority of earnings of our non-U.S. subsidiaries. We do not provide for deferred taxes on a limited number of our non-U.S. subsidiaries established in jurisdictions that apply significant restrictions for repatriating cash.
The amount of cumulative non-distributed earnings considered to be indefinitely reinvested outside the U.S. at September 30, 2026, is $183 million. It is not practicable to estimate the amount of additional taxes that may be payable upon distribution of these earnings.
We believe it is more likely than not that we will realize our deferred tax assets through the reduction of future taxable income, other than for the deferred tax assets reflected below.
Tax attributes and related valuation allowances at September 30, 2026 consists of (in millions):
Tax attributes and related valuation allowancesTax Benefit AmountValuation AllowanceCarryforward
Period Ends
Non-United States net operating loss carryforward$4 $— 2027-9/30/2044
Non-United States net operating loss carryforward6 5 Indefinite
Non-United States capital loss carryforward15 15 Indefinite
Non-United States credit carryforward2 — 2029
United States capital loss carryforward57 — 2030-2031
State and local net operating loss carryforward4 — 2027-2046
State tax credit carryforward12 — 2046-2076
Subtotal100 20 
Other deferred tax assets1 1 Indefinite
Total$101 $21 
Income Taxes Paid
In accordance with the updated requirements of ASU 2023-09 for the year ended September 30, 2026, cash paid for income taxes was as follows:
2026
US Federal$162 
US State and Local20 
Foreign
Switzerland35 
   Singapore49 
   Other96 
Subtotal$180 
Total$362 
Cash paid directly to tax authorities for income taxes was $356 for the year ended September 30, 2025 and $479 for the year ended September 30, 2024.
Unrecognized Tax Benefits
A reconciliation of our gross unrecognized tax benefits, excluding interest and penalties, is as follows (in millions):
202620252024
Gross unrecognized tax benefits balance at beginning of year$29 $25 $10 
Additions based on tax positions related to the current year3 5 5 
Additions based on tax positions related to prior years— 2 10 
Reductions based on tax positions related to prior years(5)
Reductions related to settlements with taxing authorities(5)(1)— 
Reductions related to lapses of statute of limitations(3)(2)— 
Gross unrecognized tax benefits balance at end of year$19 $29 $25 
The amount of gross unrecognized tax benefits that would reduce our effective tax rate if recognized was $19 million, $29 million, and $25 million at September 30, 2026, 2025, and 2024, respectively.
Accrued interest and penalties related to unrecognized tax benefits were $2 million, at September 30, 2026, 2025, and 2024, respectively. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision. (Expenses) benefits recognized in 2026, 2025, were $0 million, and in 2024 ($1) million.
We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $9 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations. If all of the unrecognized tax benefits were recognized, the net reduction to our income tax provision, including the recognition of interest and penalties and offsetting tax assets, could be up to $10 million.
We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal and state and local income tax examinations for years before 2018 and non-U.S. income tax examinations for years before 2008.