
	Year Ended September 30,
(in millions)	2021		2020		2019
Ireland	$	(1)	$	(3)	$	(1)
United States	(244)		(111)		(170)
Other Foreign	1,684		(315)		173
Income before income taxes and noncontrolling interests	$	1,439	$	(429)	$	2


	Year Ended September 30,
(in millions)	2021		2020		2019
Current
Ireland	$	1	$	—	$	—
US - Federal and State	1		(1)		4
Other Foreign	207		91		118
	209		90		122
Deferred
Ireland	1		—		—
US - Federal and State	(1)		—		1
Other Foreign	40		(33)		287
	40		(33)		288

Income tax provision	$	249	$	57	$	410

The significant components of Adient's income tax provision are summarized in the following tables. These amounts do not include the impact of income tax expense related to our nonconsolidated partially-owned affiliates, which is netted against equity income on the consolidated statements of income (loss).


	Year Ended September 30,
(in millions)	2021		2020		2019
Tax expense at Ireland statutory rate	$	180	$	(54)	$	—
State and local income taxes, net of federal benefit	(15)		(30)		(41)
Foreign tax rate differential	(6)		(127)		(109)
Notional interest deduction	(10)		(44)		(63)
Credits and incentives	(11)		(7)		(9)

Goodwill impairment	—		9		—
Repatriation of foreign earnings	18		18		31
Foreign exchange	—		(1)		2
Impact of enacted tax rate changes	(26)		(3)		(5)

Audit settlements and change in uncertain tax positions	24		56		107
Change in valuation allowance	(85)		332		503
Impairment of subsidiaries	35		(24)		(3)
Tax impact of corporate equity transactions	133		(77)		—
Other	12		9		(3)
Income tax provision	$	249	$	57	$	410

The income tax expense was higher than the Irish statutory rate of 12.5% for fiscal 2021 primarily due to to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the establishment of valuation allowances in certain jurisdictions, and the repatriation of foreign earnings, partially offset by tax benefits from audit settlements, the write-off of deferred tax liabilities related to withholding taxes, and withholding taxes on the 2021 Yanfeng Transaction at a rate lower than the Irish statutory rate of 12.5%. No items included in the other category are individually, or when appropriately aggregated, significant.

The income tax expense was higher than the Irish statutory rate of 12.5% for fiscal 2020 primarily due to the inability to recognize a tax benefit for losses in jurisdictions with valuation allowances, the repatriation of foreign earnings, and changes in uncertain tax positions, partially offset by the tax benefits related to the impairment and sale of Adient’s YFAI investment, sale of Adient’s automotive fabrics manufacturing business, and impairment charges recorded in the Asia segment. No items included in the other category are individually, or when appropriately aggregated, significant.

The income tax expense was higher than the Irish statutory rate of 12.5% for fiscal 2019 primarily due to the recognition of valuation allowances in Luxembourg, Poland, and the United Kingdom, the repatriation of foreign earnings, changes in uncertain tax positions and the impact of recognizing no tax benefit for losses in jurisdictions with valuation allowances. No items included in the other category are individually, or when appropriately aggregated, significant.

The foreign tax rate differential benefits for fiscal 2019 through fiscal 2021 are primarily driven by losses earned in jurisdictions where the statutory rate is greater than 12.5% and by the pretax book income of nonconsolidated partially-owned affiliates whose corresponding income tax expense is netted against equity income on the consolidated statements of income.


	September 30,
(in millions)	2021		2020
Other noncurrent assets	$	134	$	178
Other noncurrent liabilities	(212)		(175)
Net deferred tax asset/(liability)	$	(78)	$	3


	September 30,
(in millions)	2021		2020
Deferred tax assets:
Accrued expenses and reserves	$	126	$	115
Employee and retiree benefits	52		53
Net operating loss and other credit carryforwards	1,056		1,072
Property, plant and equipment	159		163
Intangible assets	181		257
Operating lease liabilities	79		80
Foreign currency adjustments	—		17
Research and development	23		20

Other	12		3
	1,688		1,780
Valuation allowances	(1,637)		(1,656)
	51		124
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries	32		41
Indirect tax credits	18		—
Operating lease right-of-use assets	79		80
	129		121
Net deferred tax asset/(liability)	$	(78)	$	3

At September 30, 2021, Adient had available net operating loss carryforwards of approximately $4.2 billion which are available to reduce future tax liabilities. Net operating loss carryforwards of $2.5 billion will expire at various dates between 2022 and 2041, with the remainder having an indefinite carryforward period. Net operating loss carryforwards of $2.8 billion are offset by a valuation allowance.

Adient reviews the realizability of its deferred tax assets on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or combined group recording the net deferred tax asset are considered, along with any other positive or negative evidence. All of the factors that Adient considers in evaluating whether and when to establish or release all or a portion of the deferred tax asset valuation allowance involve significant judgment. Since future financial results may differ from previous estimates, periodic adjustments to Adient's valuation allowances may be necessary.

As a result of Adient’s fiscal 2021 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined it was more likely than not that certain deferred tax assets in the Czech Republic, Korea, Mexico, and other jurisdictions would not be realized and recorded income tax expense of $5 million, $5 million, $8 million, and $4 million, respectively, to establish valuation allowances. Adient continues to record valuation allowances on certain deferred tax assets in Germany, Hungary, Luxembourg, Mexico, Poland, Spain, the United Kingdom, the U.S. and other jurisdictions as it remains more likely than not that they will not be realized.

As a result of Adient's fiscal 2020 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence, Adient determined it was more likely than not that deferred tax assets in certain jurisdictions would not be realized. These valuation allowances did not have a material impact on the consolidated financial statements.

As a result of Adient's fiscal 2019 analysis of the realizability of its worldwide deferred tax assets, and after considering tax planning initiatives and other positive and negative evidence (including the external debt refinancing, the related incremental net financing costs, and the restructuring of the internal financing which occurred in the third quarter of fiscal 2019 and including the long-lived asset impairment recorded in the second quarter of fiscal 2019), Adient determined it was more likely

than not that deferred tax assets in Luxembourg (Q3), the United Kingdom (Q3) and certain Poland entities (Q2) would not be realized and recorded income tax expense of $229 million, $25 million and $43 million, respectively, to establish valuation allowances.

Adient is subject to income taxes in Ireland, the U.S. and other foreign jurisdictions. The following table provides the earliest open tax year by major jurisdiction for which Adient could be subject to income tax examination by the tax authorities:


Tax Jurisdiction						Earliest Year Open
Brazil						2016
China						2011
Czech Republic						2013
France						2018
Germany						2016
Hong Kong						2015
Japan						2016
Luxembourg						2014
Mexico						2015
Poland						2011
Spain						2016
United Kingdom						2015
United States						2017

Adient regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. For the year ended September 30, 2021, Adient believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial statements. However, the final determination with respect to tax audits and any related litigation could be materially different from Adient’s estimates.

For the years ended September 30, 2021, 2020 and 2019, Adient had gross tax effected unrecognized tax benefits of $499 million, $483 million, and $414 million, respectively. If recognized, $129 million of Adient's unrecognized tax benefits would impact the effective tax rate. Total net accrued interest for the years ended September 30, 2021, 2020 and 2019, was approximately $18 million, $15 million and $10 million, respectively (net of tax benefit). Adient recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.


	Year Ended September 30,
(in millions)	2021		2020		2019
Beginning balance	$	483	$	414	$	288
Additions for tax positions related to the current year	29		96		108
Additions for tax positions of prior years	11		17		45
Reductions for tax positions of prior years	(9)		(38)		(22)
Settlements with taxing authorities	(12)		(4)		—
Statute closings	(3)		(2)		(5)
Ending balance	$	499	$	483	$	414

During the next twelve months, it is reasonably possible that tax audit resolutions or applicable statute of limitation lapses could result in a significant change in the balance of gross unrecognized tax benefits. Given the number of years, jurisdictions and positions subject to examination, Adient is unable to estimate the full range of possible adjustments to the balance of unrecognized tax benefits.

Adient has recorded a deferred tax liability of approximately $32 million as of September 30, 2021 on the undistributed earnings of certain consolidated and unconsolidated foreign affiliates for which the Company does not have an indefinite reinvestment assertion. The Company has not provided for deferred taxes on the remainder of undistributed earnings from consolidated foreign affiliates because such earnings should not give rise to additional tax liabilities upon repatriation or are considered to be indefinitely reinvested. It is not practicable to determine the unrecognized deferred tax liability on these earnings because the actual tax liability, if any, is dependent on circumstances existing when remittance occurs.

Income taxes paid for the fiscal year ended September 30, 2021 were $78 million, excluding $134 million of withholding taxes on the 2021 Yanfeng Transaction. Income taxes paid for the fiscal year ended September 30, 2020 were $98 million. Income taxes paid for the fiscal year ended September 30, 2019 were $102 million.

On March 27, 2020, the House passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief bill, and the president signed the legislation into law. Adient does not expect the provisions of the legislation to have a significant impact on the effective tax rate or the income tax payable and deferred income tax positions of the Company.

During the fourth quarter of 2019, certain deferred tax liabilities were remeasured to reflect a reduction in withholding tax rate on the earnings of our nonconsolidated partially owned affiliates resulting in a benefit of $9 million.

During the third quarter of fiscal 2019, Luxembourg enacted legislation reducing the nominal corporate tax rate to 17% from 18%. For Adient, this reduced its aggregate income tax rate to 24.9% from 26.0% and applies retroactively to the fiscal 2019 tax year. As a result of the law change, Adient recorded income tax expense of $10 million related to the write down of deferred tax assets.

During the first quarter of fiscal 2019, GAAS (a subsidiary of Adient in China) was approved for High and New Tech Enterprise status for the three-year period of 2018 to 2020, thereby reducing their tax rate from 25% to 15%. As a result, a $7 million income tax benefit was recorded on the reduction of deferred tax liabilities and a reduction of 2018 calendar year income taxes.

During fiscal years 2021, 2020, and 2019, other tax legislation was adopted in various jurisdictions. These law changes did not have a material impact on the consolidated financial statements.

During the fourth quarter of fiscal 2021, Adient recognized $134 million of withholding tax expense associated with the 2021 Yanfeng Transaction. Refer to Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information regarding this transaction.

During the fourth quarter of fiscal 2021, Adient recognized a tax benefit of $2 million related to the write-off of a deferred tax liability associated with a Chinese joint venture’s distribution of unremitted earnings. The distribution was reinvested in a wholly-owned Chinese subsidiary, thereby exempting the distribution from withholding tax. The investment in the wholly-owned subsidiary is intended to be indefinitely reinvested, warranting the derecognition of the pre-existing deferred tax liability.

During the third quarter of fiscal 2021, Adient recognized an additional $30 million pre-tax gain related to Brazil indirect tax credits as a result of a favorable supreme court ruling. The tax expense associated with this gain was $10 million.

During the third quarter of fiscal 2021, Adient recognized a tax benefit of $11 million related to the write-off of a deferred tax liability associated with a Chinese joint venture’s distribution of unremitted earnings. The distribution was reinvested in a wholly-owned Chinese subsidiary, thereby exempting the distribution from withholding tax. The investment in the wholly-owned subsidiary is intended to be indefinitely reinvested, warranting the derecognition of the pre-existing deferred tax liability.

During the second quarter of fiscal 2021, Adient recognized a $33 million pre-tax gain related to the sale of its equity interest in SJA. The withholding tax expense associated with this gain was $5 million.

During the first quarter of fiscal 2021, Adient recognized an $8 million pre-tax gain related to Brazil indirect tax credits. The tax expense associated with this gain was $3 million.

In fiscal 2020, Adient committed to a restructuring plan (“2020 Plan”) of $205 million. Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The restructuring costs generated a $6 million tax benefit, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions.

During the fourth quarter of fiscal 2020, Adient sold its investment in YFAI and its automotive fabrics manufacturing business. Refer to Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information. The tax benefits associated with the sales of the YFAI investment and automotive fabrics manufacturing business were $12 million and $3 million, respectively.

During the third quarter of fiscal 2020, an impairment charge of $27 million was recorded in the Asia segment related to customer relationship intangible assets. Refer to Note 6, “Goodwill and Other Intangible Assets,” of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $5 million.

During the first quarter of fiscal 2020, Adient recognized a pre-tax non-cash impairment of $216 million in equity income related to Adient's YFAI investment. Refer to Note 3, “Acquisitions and Divestitures,” of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $4 million. An additional impairment of $6 million was recorded in the third quarter of fiscal 2020 related to this investment, with no additional tax benefit being recorded.

In fiscal 2019, Adient committed to a significant restructuring plan (“2019 Plan”) and recorded a net $92 million of restructuring and impairment costs in the consolidated statements of income. Refer to Note 15, "Restructuring and Impairment Costs," of the notes to the consolidated financial statements for additional information. The restructuring costs generated a $5 million tax benefit, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions.

During the second quarter of fiscal 2019, Adient recognized a pre-tax impairment charge on long-lived assets of $66 million. Refer to Note 16, "Impairment of Long-Lived Assets," of the notes to the consolidated financial statements for additional information. The tax benefit associated with the impairment charge was $2 million, which was negatively impacted by geographic mix and Adient’s current tax position in these jurisdictions.