Income Taxes (Tables)

12 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Summary of Provision for Income Taxes Related to Continuing Operations

A summary of the provision for income taxes related to continuing operations follows.

(In millions)	2020			2019			2018
Current
Federal	$	4		$	(2	)	$	20
State		(7	)		(7	)		(2	)
Foreign		34			35			74
		31			26			92
Deferred		(43	)		20			(100	)
Income tax expense (benefit)	$	(12	)	$	46		$	(8	)

Summary of Temporary Differences of Deferred Tax Assets and Liabilities

Temporary differences that give rise to significant deferred tax assets and liabilities as of September 30 are presented in the following table.

(In millions)	2020			2019
Deferred tax assets
Foreign net operating loss carryforwards (a)	$	37		$	36
Employee benefit obligations		30			29
Environmental, self-insurance and litigation reserves (net of receivables)		103			114
State net operating loss carryforwards (net of unrecognized tax benefits) (b)		37			38
Compensation accruals		23			28
Credit carryforwards (net of unrecognized tax benefits) (c)		19			10
Other items		30			38
Other lease liability		36			—
Valuation allowances (d)		(75	)		(83	)
Total deferred tax assets		240			210
Deferred tax liabilities
Goodwill and other intangibles (e)		200			243
Property, plant and equipment		208			207
Right of use assets		34			—
Other		1			1
Total deferred tax liabilities		443			451
Net deferred tax liability	$	(203	)	$	(241	)

(a) Gross net operating loss carryforwards of $145 million will expire in future years beyond 2022 or have no expiration.

(b) Apportioned net operating loss carryforwards generated of $1.0 billion will expire in future years as follows: $64 million in 2020, $121 million in 2021 and the remaining balance in other future years.

(c) Credit carryforwards consist primarily of foreign tax credits of $12 million expiring in future years beyond 2021, and state tax credits that will expire in 2025 or other future years.

(d) Valuation allowances primarily relate to certain state and foreign net operating loss carryforwards.

(e) The total gross amount of goodwill as of September 30, 2020 expected to be deductible for tax purposes is $5 million.

Summary of Income from Continuing Operations Before Income Taxes and Reconciliation of Provision for Income Taxes

The U.S. and foreign components of income from continuing operations before income taxes and a reconciliation of the statutory federal income tax with the provision for income taxes follow. The foreign components of income from continuing operations disclosed in the following table exclude any allocations of certain corporate expenses incurred in the U.S.

(In millions)	2020			2019			2018
Income (loss) from continuing operations before income taxes
United States	$	(579	)	$	(76	)	$	(214	)
Foreign		76			146			225
Income (loss) from continuing operations before income taxes	$	(503	)	$	70		$	11
Income taxes computed at U.S. statutory rate (a)	$	(105	)	$	15		$	3
Increase (decrease) in amount computed resulting from
Tax reform (b)		(23	)		29			44
Uncertain tax positions		9			10			(13	)
Deemed inclusions, foreign dividends and other restructuring (c)		33			30			48
Foreign tax credits		(17	)		(17	)		(54	)
Valuation allowance changes (d)		(1	)		14			(2	)
Research and development credits		(7	)		(6	)		(5	)
State taxes (e)		(4	)		(5	)		(3	)
Goodwill impairment		95			—			—
International rate differential		(2	)		(30	)		(50	)
Other items (f)		10			6			24
Income tax expense (benefit)	$	(12	)	$	46		$	(8	)

(a) The domestic tax rate is 21% for 2020 and 2019, respectively and 24.5% for 2018. 

(b) 2020 includes a benefit of $23 million from Swiss tax reform. 2019 includes an expense of $29 million related to a return to provision adjustment for transition tax. 2018 includes expense of $187 million related to the one-time transition tax, a benefit of $139 million related to the deferred rate change and a benefit of $4 million related to tax reform in a foreign jurisdiction. Foreign tax credits of $46 million related to the transition tax were included within the foreign tax credits caption. Other items related to the transition tax or other U.S. tax reform offset to immaterial amounts within the state taxes, uncertain tax positions and other captions and net to zero in the aggregate. In summary, total U.S. tax reform expense was $2 million related to transition tax expense of $187 million, a deferred rate change benefit of $139 million and a foreign tax credit benefit of $46 million. Ashland completed its calculation of the total post-1986 E&P for these foreign subsidiaries and recorded an additional unfavorable $29 million adjustment in 2019.

(c) 2020 includes $31 million primarily related to GILTI permanent adjustments. 2019 includes $19 million primarily related to GILTI permanent adjustments. 2018 includes a gain recognition of $6 million, deemed inclusions of $13 million and tax restructuring costs of $23 million.

(d) 2019 includes $5 million related to state tax NOL’s and $9 million related to a foreign jurisdiction. 2018 includes a $5 million benefit for the release of a foreign tax credit valuation allowance.   

(e) 2018 includes a $27 million tax benefit for a valuation reserve release against state net operating losses and $26 million of tax expense for state tax rate changes.

(f) 2020 includes $4 million for foreign withholding taxes. 2018 includes $22 million related to foreign withholding taxes.     

Summary of Changes in Unrecognized Tax Benefits

Changes in unrecognized tax benefits were as follows:

(In millions)
Balance at September 30, 2018 (a)	$	164
Increases related to positions taken on items from prior years		1
Decreases related to positions taken on items from prior years		(5	)
Increases related to positions taken in the current year		21
Lapse of statute of limitations		(10	)
Disposition of Composites and Marl facility		(6	)
Balance at September 30, 2019 (a)		165
Increases related to positions taken on items from prior years		6
Decreases related to positions taken on items from prior years		(2	)
Increases related to positions taken in the current year		5
Lapse of statute of limitations		(3	)
Disposition of Composites and Marl facility		—
Balance at September 30, 2020	$	171

(a) Ashland has indemnity receivables from Valvoline and Pharmachem for $29 million and $32 million of the gross unrecognized tax benefits at September 30, 2020 and 2019, respectively, recorded within other noncurrent assets.