Income Taxes (Tables)

12 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Provision for Income Taxes from Continuing Operations

The provision (benefit) for income taxes the years ended September 30 consisted of:

(Millions of dollars)	2021		2020		2019
Current:
Federal	$	102	$	(50)	$	235
State and local, including Puerto Rico	46		47		41
Foreign	290		400		300
	$	438	$	397	$	576
Deferred:
Domestic	$	(286)	$	(184)	$	(577)
Foreign	(2)		(101)		(56)
	(288)		(286)		(633)
Income tax provision (benefit)	$	150	$	111	$	(57)

The following were included for the years ended September 30 as a component of Income tax provision (benefit) on the consolidated statements of income.

(Millions of dollars)	2021		2020		2019
Interest and penalties associated with unrecognized tax benefits	$	5	$	1	$	26

Components of Income from Continuing Operations Before Income Taxes

The components of Income Before Income Taxes for the years ended September 30 consisted of:

(Millions of dollars)	2021		2020		2019
Domestic, including Puerto Rico	$	133	$	(489)	$	799
Foreign	2,109		1,474		377
Income Before Income Taxes	$	2,242	$	985	$	1,176

Summary of Gross Amounts of Unrecognized Tax Benefits

The table below summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled. The Company believes it is reasonably possible that the amount of unrecognized benefits will change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, other activity, or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate.

(Millions of dollars)	2021		2020		2019
Balance at October 1	$	620	$	577	$	601
Increase due to acquisitions	2		1		3
Increase due to current year tax positions	23		35		11
Increase due to prior year tax positions	6		76		6
Decreases due to prior year tax positions	(4)		(49)		(39)
Decrease due to settlements with tax authorities	(183)		(4)		—
Decrease due to lapse of statute of limitations	(100)		(16)		(5)
Balance at September 30	$	364	$	620	$	577
Unrecognized tax benefits that would affect the effective tax rate if recognized	$	447	$	719	$	624

Deferred Income Taxes

Deferred income taxes at September 30 consisted of:

	2021				2020
(Millions of dollars)	Assets		Liabilities		Assets		Liabilities
Compensation and benefits	$	527	$	—	$	554	$	—
Property and equipment	—		410		—		361
Intangibles	—		2,160		—		2,408
Loss and credit carryforwards	2,107		—		1,900		—
Product recall and liability reserves	191		—		241		—
Other	555		123		501		137
	3,379		2,693		3,196		2,906
Valuation allowance	(2,036)		—		(1,820)		—
Net (a)	$	1,343	$	2,693	$	1,376	$	2,906

(a)Net deferred tax assets are included in Other Assets and net deferred tax liabilities are included in Deferred Income Taxes and Other Liabilities on the consolidated balance sheets.

Reconciliation of Federal Statutory Tax Rate to Company's Effective Tax Rate

A reconciliation of the federal statutory tax rate to the Company’s effective income tax rate was as follows:

	2021		2020		2019
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
U.S. tax legislation (see discussion above)	—		—		(4.3)
State and local income taxes, net of federal tax benefit	(1.9)		(1.9)		0.1
Foreign income tax at rates other than 21%	(8.1)		(14.8)		(6.6)
Effect of foreign operations	(0.1)		19.1		(5.5)
Effect of Research Credits and FDII/Domestic Production Activities	(1.6)		(5.0)		(3.3)
Effect of share-based compensation	0.1		(4.5)		(3.9)
Effect of gain on divestitures	—		(4.5)		(2.0)
Effect of valuation allowance release	(1.7)		—		—
Other, net	(1.0)		1.9		(0.3)
Effective income tax rate	6.7	%	11.3	%	(4.8)	%

Summary of Income Tax Holiday

The approximate tax impacts related to tax holidays in various countries in which the Company does business are provided below. The tax holidays expire at various dates through 2028. The Company’s income tax payments, net of refunds are also provided below.

(Millions of dollars, except per share amounts)	2021		2020		2019
Tax impact related to tax holidays	$	248	$	136	$	(43)
Impact of tax holiday on diluted earnings per share	0.85		0.48		(0.16)
Income tax payments, net of refunds	670		518		536