Income Taxes

9 Months Ended

Jun. 30, 2021

INCOME TAXES

Income tax provisions for interim quarterly periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual discrete items related specifically to interim periods. The following summarizes income tax expense and the effective tax rate in each interim period:


	Three months ended						Nine months ended
	June 30						June 30
(In millions)	2021			2020			2021			2020
Income tax expense	$	31		$	19		$	83		$	68
Effective tax rate percentage	24.2		%	24.4		%	24.8		%	25.9		%

The decreases in effective tax rates from the prior year periods were principally driven by favorable discrete tax benefits in the current year. In addition, tax reform legislation enacted in the prior year resulted in lower current year taxes and unfavorable discrete activity in the nine months ended June 30, 2020. Higher pre-tax earnings in the three and nine months ended June 30, 2021 more than offset these benefits resulting in increased tax expense for the current year periods.

From a combination of statute expirations and anticipated audit settlements in the next twelve months, Valvoline currently estimates a decrease in the range of $25 million to $35 million in indemnity obligations due to the Company's former parent, which is expected to include certain unrecognized tax benefits.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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