Income Taxes

3 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At the end of each interim period, we estimate a base effective tax rate that we expect for the full year based on our most recent forecast of pre-tax income, permanent book and tax differences, and global tax planning strategies. We use this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant unusual items and items that are reported net of their related tax effects in the period in which they occur.

The effective tax rate was 11.7 percent for the three months ended December 31, 2025, compared to 16.4 percent for the three months ended December 31, 2024. The effective tax rate was lower than the U.S. statutory rate of 21 percent for the three months ended December 31, 2025 and 2024, primarily due to higher discrete tax benefits, including a tax benefit related to the anticipated dissolution of the Sensia joint venture, and excess income tax benefits on share-based compensation.

Our final payment of $97 million related to the U.S. transition tax under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) will be paid in the second quarter of 2026 and is classified in Other current liabilities in the Consolidated Balance Sheet as of December 31, 2025, and September 30, 2025.

In October 2021, the Organization for Economic Cooperation and Development (OECD) and G20 Finance Ministers reached an agreement, known as Base Erosion and Profit Shifting (BEPS) Pillar Two, that, among other things, ensures that income earned in each jurisdiction that qualifying multinational enterprises operate in is subject to a minimum corporate income tax rate of at least 15 percent. Discussions related to the formal implementation and enactment of this agreement, including within the tax law of each member jurisdiction including the United States, are ongoing. Certain countries have enacted the Pillar Two framework, including Singapore, which is expected to result in the greatest impact to the Company. The enactment of this regulation applies beginning this fiscal year, resulting in an approximate increase to our effective tax rate of 3 percent as well as in the amount of global corporate income tax paid. Furthermore, the side-by-side agreement released by the OECD on January 5, 2026, has not altered the anticipated increase in our effective tax rate.

Unrecognized Tax Benefits

The amount of gross unrecognized tax benefits was $27 million at December 31, 2025, and $29 million at September 30, 2025, respectively, of which the entire amount would reduce our effective tax rate if recognized.

Accrued interest and penalties related to unrecognized tax benefits were $2 million at both December 31, 2025 and September 30, 2025. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision.

We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $22 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations. If all of the unrecognized tax benefits were recognized, the net reduction to our income tax provision, including the recognition of interest and penalties and offsetting tax assets, could be up to $23 million.

We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal income tax examinations for years before 2018, state and local income tax examinations for years before 2014, and foreign income tax examinations for years before 2008.