Income Taxes

9 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12—Income Taxes

The effective income tax rates were 41% and 26% for the three and nine months ended June 30, 2021, respectively, and 19% for the three and nine months ended June 30, 2020. The effective tax rates for the three and nine months ended June 30, 2021 differ from the effective tax rates for the same periods in the prior year primarily due to the following:

•during the three months ended June 30, 2021, a $1.0 billion non-recurring, non-cash tax expense related to the remeasurement of UK deferred tax liabilities, as discussed below;

•during the three months ended June 30, 2021, a $51 million tax benefit as a result of a tax position taken on certain expenses; and

•during the nine months ended June 30, 2021, $147 million of tax benefits as a result of the conclusion of audits by taxing authorities.

On June 10, 2021, the UK enacted legislation that will increase the tax rate from 19% to 25%, effective April 1, 2023. As a result, the Company recorded a non-recurring, non-cash tax expense related to the remeasurement of its net UK deferred tax liabilities, primarily related to intangibles recorded upon the acquisition of Visa Europe in fiscal 2016.

During the three months ended June 30, 2021, the Company’s gross and net unrecognized tax benefits increased by $80 million and $39 million, respectively. During the nine months ended June 30, 2021, the Company’s gross and net unrecognized tax benefits decreased by $37 million and $137 million, respectively. The change in unrecognized tax benefits is related to various tax positions across several jurisdictions. Additionally, for the nine month period, the decrease in unrecognized tax benefits is primarily due to the recognition of previously unrecognized tax benefits as a result of the conclusion of audits by taxing authorities, partially offset by increases in gross timing differences. During the three and nine months ended June 30, 2021, there were no significant changes in accrued interest related to uncertain tax positions. During the three and nine months ended June 30, 2020, the Company’s accrued interest related to uncertain tax positions increased by $18 million and $56 million, respectively.

The Company’s tax filings are subject to examination by U.S. federal, state and foreign taxing authorities. The timing and outcome of the final resolutions of the various ongoing income tax examinations are highly uncertain. It is not reasonably possible to estimate the increase or decrease in unrecognized tax benefits within the next twelve months.

In September 2020, the Company accepted a settlement offer related to the examination of Canadian tax returns dating back to fiscal 2003, which was subject to approval by the Tax Court of Canada. On January 21, 2021, the Tax Court of Canada approved the settlement agreement related to the examination. The Company’s income tax provision was adjusted to reflect the estimated impact of the settlement in fiscal 2020.

The American Rescue Plan Act of 2021 (the “ARP Act”) was enacted in the U.S. on March 11, 2021. The ARP Act is not expected to have a material impact on the Company’s financial results.