Income from continuing operations before income taxes and equity in net earnings of affiliated companies was as follows:

	Years Ended September 30
	2020			2019			2018
	(In millions)
Domestic	$	(274	)	$	(66	)	$	(229	)
Foreign		241			321			346
Income from continuing operations before income taxes and equity in earnings of affiliated companies	$	(33	)	$	255		$	117

	Years Ended September 30
	2020			2019			2018
	(In millions)
U.S. federal and state:
Current	$	(1	)	$	2		$	14
Deferred		139			(30	)		114
Total		138			(28	)		128
Foreign:
Current		62			95			88
Deferred		(9	)		3			(23	)
Total		53			98			65
Provision (benefit) for income taxes	$	191		$	70		$	193

The provision (benefit) for income taxes differed from the provision for income taxes as calculated using the U.S. statutory rate as follows:

	Years Ended September 30
	2020			2019			2018
	(In millions)
Computed tax expense at the federal statutory rate	$	(7	)	$	53		$	29
Foreign impact of taxation at different rates, repatriation, valuation allowance, and other		4			17			(8	)
Impact of the Tax Cuts and Jobs Act of 2017		—			—			159
Global Intangible Low Taxed Income (GILTI)		(4	)		10			—
Impact of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act of 2020		(10	)		—			—
Impact of increase (decrease) in valuation allowance on U.S. deferred taxes		228			—			—
U.S. and state benefits from research and experimentation activities		(2	)		(2	)		(2	)
Provision (settlement) of unrecognized tax benefits		(7	)		(8	)		1
Impact of goodwill impairment charge		—			—			18
Permanent differences, net		—			1			(1	)
State taxes, net of federal effect		(11	)		(1	)		(3	)
Provision (benefit) for income taxes	$	191		$	70		$	193

In July 2020, final U.S. tax regulations were issued regarding the Global Intangible Low Taxed Income High-Tax exception (“GILTI” ”HTE"), allowing taxpayers to exclude from GILTI income of a Controlled Foreign Corporation (“CFC”) that incurs a foreign tax rate more than 90% of the top U.S. corporate tax rate. A GILTI HTE election may be made on an annual basis, and taxpayers may choose to apply the election to taxable years beginning after December 31, 2017. Cabot expects to make the GILTI HTE election for fiscal 2020 and 2019 and therefore recorded the impact of making the election for fiscal 2020 as well as a retrospective election for fiscal 2019 in full during the fourth quarter of fiscal 2020.

	September 30
	2020			2019
	(In millions)
Deferred tax assets:
Deferred expenses	$	19		$	15
Intangible assets		37			28
Inventory		13			9
Operating lease liability		20			—
Other		32			3
Pension and other benefits		35			41
Net operating loss carryforwards		109			124
Foreign tax credit carryforwards		58			20
R&D credit carryforwards		44			43
Other business credit carryforwards		23			29
Subtotal		390			312
Valuation allowance		(317	)		(124	)
Total deferred tax assets	$	73		$	188

	September 30
	2020			2019
	(In millions)
Deferred tax liabilities:
Property, plant and equipment	$	(40	)	$	(61	)
Right of use asset		(20	)	-
Unremitted earnings of non-U.S. subsidiaries		(18	)		(5	)
Total deferred tax liabilities	$	(78	)	$	(66	)

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit utilization of the existing deferred tax assets. When performing this assessment, the Company looks to the potential future reversal of existing taxable temporary differences, taxable income in carryback years and the feasibility of tax planning strategies and estimated future taxable income. Failure to achieve operating income targets resulting in a cumulative loss may change the Company’s assessment regarding the realization of Cabot’s deferred tax assets, resulting in valuation allowance being recorded against some or all of the Company’s deferred tax assets. The need for a valuation allowance can also be affected by changes to tax laws, changes to statutory tax rates and changes to future taxable income estimates. A valuation allowance represents management’s best estimate of the non-realizable portion of the deferred tax assets. Any adjustments in a valuation allowance would result in an adjustment to income tax expense.

In determining the recoverability of its U.S. deferred tax assets, the Company considered its cumulative loss incurred over the three-year period ended September 30, 2020. Such objective negative evidence limits the Company’s ability to consider other subjective evidence, such as its projections for future growth. Given the weight of objectively verifiable historical losses from the Company's U.S. operations, the Company has recorded a valuation allowance on all of its U.S. deferred tax assets of $253 million comprised of $18 million of U.S. state net operating loss carryforwards (“NOLs”), $58 million of foreign tax credits, $44 million of U.S. R&D credits, $19 million of state tax credits and $114 million of other net deferred tax assets (primarily composed of deferred expenses) during the fourth quarter of fiscal 2020. The Company expects to continue to record a valuation allowance against these assets until sufficient positive evidence exists to support its reversal.

The valuation allowance increased by $193 million in fiscal 2020 compared to fiscal 2019 primarily due to the recording of a valuation allowance charge against all of the Company’s U.S. net deferred tax assets of $228 million as of September 30, 2020, of which $132 million existed at the beginning of the year and $96 million was generated during fiscal 2020 resulting in a $253 million valuation allowance against all U.S. net deferred tax assets. The foreign valuation allowance decreased $32 million primarily due to the expiration of net operation losses against which a valuation allowance was recorded. The valuation allowance decreased by $45 million in fiscal 2019 primarily due to the release of valuation allowance from the expiration of net operating losses in certain jurisdictions and the divestiture of the Company’s Specialty Fluids business of $16 million.

After the valuation allowance, approximately $32 million of foreign NOLs and less than $1 million of other tax credit carryforwards remained at September 30, 2020. The benefits of these carryforwards are dependent upon taxable income during the carryforward period in the jurisdictions in which they arose.

The following table provides detail surrounding the expiration dates of NOLs and other tax credit carryforwards before valuation allowances:

Years Ending September 30	NOLs		Credits
	(In millions)
2021 - 2027	$	168	$	50
2028 and thereafter		198		73
Indefinite carryforwards		287		2
Total	$	653	$	125

As of September 30, 2020, provisions have not been made for non-U.S. withholding taxes or other applicable taxes on $1,631 million of undistributed earnings of non-U.S. subsidiaries, as these earnings are considered indefinitely reinvested. It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings. Cabot continually reviews the financial position and forecasted cash flows of its U.S. consolidated group and foreign subsidiaries in order to reaffirm the Company’s intent and ability to continue to indefinitely reinvest earnings of its foreign subsidiaries or whether such earnings will need to be repatriated in the foreseeable future. Such review encompasses operational needs and future capital investments. From time to time, however, the Company’s intentions relative to specific indefinitely reinvested amounts change because of certain unique circumstances. These earnings could become subject to non-U.S. withholding taxes and other applicable taxes if they were remitted to the U.S.

Cabot has filed its tax returns in accordance with the tax laws in each jurisdiction and recognizes tax benefits for uncertain tax positions when the position would more likely than not be sustained based on its technical merits and recognizes measurement adjustments when needed. As of September 30, 2020, the total amount of unrecognized tax benefits was $23 million, of which $14 million was recorded in the Company’s Consolidated Balance Sheets and $9 million of deferred tax assets, principally related to state NOLs, have not been recorded. In addition, accruals of $1 million and $3 million have been recorded for penalties and interest, respectively, as of September 30, 2020. Total penalties and interest recorded in the tax provision in the Consolidated Statements of Operations was $1 million in fiscal 2020, and $2 million in both 2019 and 2018. If the unrecognized tax benefits were recognized at a given point in time, there would be $23 million favorable impact on the Company’s tax provision before consideration of the impact of the potential need for valuation allowances.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal 2020, 2019 and 2018 is as follows:

	Years Ended September 30
	2020			2019			2018
	(In millions)
Balance at beginning of the year	$	27		$	37		$	36
Additions based on tax provisions related to the current year		2			—			2
Additions for tax positions of prior years		2			—			1
Reductions of tax provisions of prior years		(1	)		(1	)		—
Reductions related to settlements		(5	)		(5	)		—
Reductions from lapse of statute of limitations		(2	)		(4	)		(2	)
Balance at end of the year	$	23		$	27		$	37

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 further change in the unrecognized tax benefits may 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 2017 through 2019 tax years generally remain subject to examination by the IRS and various tax years from 2005 through 2019 remain subject to examination by the respective state tax authorities. In significant non-U.S. jurisdictions, various tax years from 2003 through 2019 remain subject to examination by their respective tax authorities. As of September 30, 2020, Cabot’s significant non-U.S. jurisdictions include Canada, China, France, Germany, Italy, Japan, and the Netherlands.