Income Taxes (Tables)

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Provision for Income Taxes from Continuing Operations

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

(Millions of dollars)	2023		2022		2021
Current:
Federal	$	364	$	17	$	72
State and local, including Puerto Rico	87		32		42
Foreign	303		228		254
	$	754	$	277	$	368
Deferred:
Domestic	$	(644)	$	(96)	$	(284)
Foreign	22		(33)		4
	(622)		(129)		(280)
Income tax provision	$	132	$	148	$	88

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

(Millions of dollars)	2023		2022		2021
Interest and penalties associated with unrecognized tax benefits	$	20	$	(6)	$	5

Components of Income from Continuing Operations Before Income Taxes

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

(Millions of dollars)	2023		2022		2021
Domestic, including Puerto Rico	$	358	$	496	$	70
Foreign	1,304		1,287		1,623
Income from Continuing Operations Before Income Taxes	$	1,662	$	1,783	$	1,692

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 during the next twelve months due to one or more of the following events: 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. However, the Company does not expect changes to have a significant effect on its results of operations, financial condition, or cash flows.

(Millions of dollars)	2023		2022		2021
Balance at October 1	$	267	$	354	$	611
Increase due to acquisitions	—		2		2
Increase due to current year tax positions	22		40		23
Increase due to prior year tax positions	33		60		5
Decreases due to prior year tax positions	(29)		—		(4)
Decrease due to settlements with tax authorities	(6)		(77)		(183)
Decrease due to lapse of statute of limitations	(18)		(112)		(100)
Balance at September 30	$	269	$	267	$	354
Unrecognized tax benefits that would affect the effective tax rate if recognized	$	366	$	348	$	447

Deferred Income Taxes

Deferred income taxes at September 30 consisted of:

	2023				2022
(Millions of dollars)	Assets		Liabilities		Assets		Liabilities
Compensation and benefits	$	426	$	—	$	430	$	—
Property and equipment	—		409		—		412
Intangibles	—		1,858		—		2,064
Loss and credit carryforwards	2,352		—		2,185		—
Product recall and liability reserves	362		—		133		—
Capitalized research and development expenses (a)	243		—		63		—
Other	531		183		524		260
	3,914		2,450		3,335		2,736
Valuation allowance	(2,272)		—		(2,093)		—
Net (b)	$	1,642	$	2,450	$	1,242	$	2,736

(a)As required by the 2017 Tax Cuts and Jobs Act, the Company’s research and development expenditures were capitalized and amortized in fiscal year 2023 for income tax purposes. This resulted in an increase in cash tax paid in fiscal year 2023 with a corresponding deferred tax benefit.

(b)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 for continuing operations was as follows:

	2023		2022		2021
Federal statutory tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal tax benefit	(1.0)		(1.1)		(2.7)
Foreign income tax at rates other than 21%	(8.2)		(7.3)		(6.4)
Effect of foreign operations	(3.9)		5.6		(1.0)
Effect of Research Credits and FDII/Domestic Production Activities	(3.2)		(2.2)		(2.0)
Effect of share-based compensation	(0.4)		(1.7)		0.1
Effect of gain on divestitures	3.2		—		—
Effect of valuation allowance release	—		(5.5)		(2.2)
Other, net	0.4		(0.5)		(1.6)
Effective income tax rate	7.9	%	8.3	%	5.2	%

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 2037. The Company’s income tax payments, net of refunds are also provided below.

(Millions of dollars, except per share amounts)	2023		2022		2021
Tax impact related to tax holidays	$	363	$	284	$	243
Impact of tax holiday on diluted earnings per share	1.26		0.99		0.83
Income tax payments, net of refunds	629		532		671