Income Tax

3 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax

F. Income Tax

Effective Tax Rate

	Three Months Ended December 31
	2023			2022
	(Dollars in millions)
(Provision) benefit for income taxes	$	(34	)	$	(20	)
Effective tax rate		36	%		24	%

For the three months ended December 31, 2023 and 2022, the (Provision) benefit for income taxes included a net discrete tax expense of $7 million and $3 million, respectively.

Income tax in Interim Periods

The Company records its tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. The income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. Losses from jurisdictions for which no benefit can be recognized are excluded from the overall computations of the estimated annual effective tax rate and a separate estimated annual effective tax rate is computed and applied to ordinary income or loss in the loss jurisdiction.

Valuation allowances are provided against the future tax benefits that arise from the deferred tax assets in jurisdictions for which the Company expects that no benefit can be recognized. The estimated annual effective tax rate may be significantly impacted by nondeductible expenses and the Company’s projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.

Uncertainties

Cabot and certain subsidiaries are under audit in a number of jurisdictions. In addition, certain statutes of limitations are scheduled to expire in the near future. It is reasonably possible that a change in the unrecognized tax benefits may also occur within the next twelve months related to the settlement of one or more of these audits or the lapse of applicable statutes of limitations. However, an estimated range of the impact on the unrecognized tax benefits cannot be quantified at this time.

Cabot files U.S. federal and state and non-U.S. income tax returns in jurisdictions with varying statutes of limitations. The 2020 through 2022 tax years generally remain subject to examination by the IRS and various tax years from 2016 through 2022 remain subject to examination by the respective state tax authorities. In foreign jurisdictions, various tax years from 2006 through 2022 remain subject to examination by their respective tax authorities.

During each of the three months ended December 31, 2023 and 2022, Cabot released uncertain tax positions of $1 million due to the expiration of statutes of limitations in various jurisdictions.