Income Taxes (Tables)

12 Months Ended

Sep. 30, 2016

Income Taxes

Significant components of the income tax expense (benefit)

	Fiscal
	2016			2015			2014
	(in millions)
Current income tax expense (benefit):
U.S.:
Federal	$	(1,115	)	$	(67	)	$	128
State		(163	)		12			(3	)
Non-U.S.		321			352			302
		(957	)		297			427
Deferred income tax expense (benefit):
U.S.:
Federal		173			87			(311	)
State		20			5			(3	)
Non-U.S.		(15	)		(52	)		33
		178			40			(281	)
Income tax expense (benefit)	$	(779	)	$	337		$	146

U.S. and non-U.S. components of income from continuing operations before income taxes

	Fiscal
	2016			2015			2014
	(in millions)
U.S.	$	(115	)	$	(31	)	$	(133	)
Non-U.S.		1,277			1,606			1,893
Income from continuing operations before income taxes	$	1,162		$	1,575		$	1,760

Reconciliation between U.S. federal income taxes at the statutory rate and income tax expense (benefit) on continuing operations

	Fiscal
	2016			2015			2014
	(in millions)
Notional U.S. federal income tax expense at the statutory rate	$	407		$	551		$	616
Adjustments to reconcile to the income tax expense (benefit):
U.S. state income tax expense (benefit), net		(93	)		11			(4	)
Other (income) expense—Tax Sharing Agreement(1)		221			18			(23	)
Tax law changes		(3	)		10			(1	)
Tax credits		(10	)		(9	)		(8	)
Non-U.S. net earnings(2)		(342	)		(275	)		(287	)
Nondeductible charges		2			2			3
Change in accrued income tax liabilities		(1,056	)		(183	)		112
Valuation allowance		97			(3	)		(239	)
Legal entity restructuring		39			211			—
Divestitures		(31	)		—			—
Other		(10	)		4			(23	)
Income tax expense (benefit)	$	(779	)	$	337		$	146

(1)	Other income (expense), net pursuant to the Tax Sharing Agreement with Tyco International and Covidien is not taxable or deductible.
(2)	Excludes nondeductible charges and other items which are separately presented.

Components of net deferred income tax asset

	Fiscal Year End
	2016			2015
	(in millions)
Deferred tax assets:
Accrued liabilities and reserves	$	286		$	262
Tax loss and credit carryforwards		4,656			4,856
Inventories		46			57
Pension and postretirement benefits		349			295
Deferred revenue		11			17
Interest		470			394
Unrecognized income tax benefits		10			378
Other		32			4
		5,860			6,263
Deferred tax liabilities:
Intangible assets		(761	)		(809	)
Property, plant, and equipment		(15	)		(1	)
Other		(84	)		(89	)
		(860	)		(899	)
Net deferred tax asset before valuation allowance		5,000			5,364
Valuation allowance		(3,096	)		(3,237	)
Net deferred tax asset	$	1,904		$	2,127

Tax loss and credit carryforwards

	Expiration Period
	Through 2021		Fiscal 2022 Through 2036		No Expiration		Total
	(in millions)
U.S. Federal:
Net operating loss carryforwards	$	—	$	1,404	$	—	$	1,404
Tax credit carryforwards		15		124		70		209
Capital loss carryforwards		36		—		—		36
U.S. State:
Net operating loss carryforwards.		53		55		—		108
Tax credit carryforwards		12		15		7		34
Non-U.S.:
Net operating loss carryforwards		12		5		2,813		2,830
Tax credit carryforwards		—		1		—		1
Capital loss carryforwards		7		—		27		34
Total tax loss and credit carryforwards	$	135	$	1,604	$	2,917	$	4,656

Activity of unrecognized income tax benefits

	Fiscal
	2016			2015			2014
	(in millions)
Balance at beginning of fiscal year	$	1,368		$	1,595		$	1,617
Additions related to prior periods tax positions		75			24			22
Reductions related to prior periods tax positions		(817	)		(291	)		(57	)
Additions related to current period tax positions		124			97			32
Acquisitions		4			—			7
Settlements		(205	)		(29	)		(14	)
Reductions due to lapse of applicable statute of limitations		(59	)		(28	)		(12	)
Balance at end of fiscal year	$	490		$	1,368		$	1,595

Tax years subject to examination in major tax jurisdictions

Jurisdiction	Open Years
China		2006 through 2016
Czech Republic		2013 through 2016
Germany		2013 through 2016
Hong Kong		2010 through 2016
Ireland		2011 through 2016
Italy		2010 through 2016
Japan		2010 through 2016
Korea		2011 through 2016
Luxembourg		2011 through 2016
Netherlands		2012 through 2016
Singapore		2011 through 2016
Spain		2012 through 2016
Switzerland		2011 through 2016
United Kingdom		2015 through 2016
U.S.—federal and state and local		1998 through 2016