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Income Taxes (Tables)

12 Months Ended

Sep. 30, 2020

The components of (loss) income before income taxes are as follows (in millions):

Income tax expense (benefit) consists of the following components (in millions):

	Year Ended September 30,
	2020			2019			2018
Current income taxes:
Federal	$	31.6		$	134.7		$	83.0
State		23.5			34.9			26.8
Foreign		66.8			69.5			86.6
Total current expense		121.9			239.1			196.4
Deferred income taxes:
Federal		42.4			44.1			(1,108.6	)
State		6.2			6.1			53.2
Foreign		(7.0	)		(12.5	)		(15.5	)
Total deferred expense (benefit)		41.6			37.7			(1,070.9	)
Total income tax expense (benefit)	$	163.5		$	276.8		$	(874.5	)

The differences between the statutory federal income tax rate and our effective income tax rate are as follows:

	Year Ended September 30,
	2020⁽¹⁾			2019			2018
Statutory federal tax rate		21.0	%		21.0	%		24.5	%
Foreign rate differential		(1.1	)		1.3			0.6
Adjustment and resolution of federal, state and foreign tax uncertainties		2.7			1.2			0.9
State taxes, net of federal benefit		(1.3	)		2.5			4.3
Tax Act ⁽²⁾		—			—			(109.1	)
Excess tax benefit related to stock compensation		(0.5	)		(0.3	)		(0.8	)
Research and development and other tax credits, net of valuation allowances and reserves		3.7			(0.7	)		(0.5	)
Income attributable to noncontrolling interest		0.1			(0.1	)		(0.1	)
Domestic manufacturer’s deduction		—			—			(1.8	)
Change in valuation allowance		(4.1	)		0.2			(1.8	)
Nondeductible transaction costs		—			1.0			—
Goodwill impairment		(51.2	)		—			—
Nontaxable increased cash surrender value		1.3			(0.6	)		(0.8	)
Withholding taxes		(0.7	)		0.6			0.5
Brazilian net worth deduction		1.7			(0.9	)		(0.9	)
Other, net		(2.9	)		(1.0	)		0.5
Effective tax rate		(31.3	)%		24.2	%		(84.5	)%

⁽¹⁾	The negative tax rate for fiscal year 2020 is the result of applying total income tax expense to the loss before income taxes. The signs within the table are consequently the opposite compared to prior year.

⁽²⁾	For the year ended September 30, 2018, the primary components are a $1,215.9 million benefit from the remeasurement of our net U.S. deferred tax liability and a one-time transition tax liability of $95.4 million or $87.1 million net of the release of a previously recorded outside basis difference.

The tax effects of temporary differences that give rise to deferred income tax assets and liabilities consist of the following (in millions):

	September 30,
	2020		2019
Deferred income tax assets:
Accruals and allowances	$	5.3	$	10.7
Employee related accruals and allowances		121.3		125.1
Pension		60.5		96.8
State net operating loss carryforwards, net of federal benefit		67.0		57.6
State credit carryforwards, net of federal benefit		79.4		69.5
Federal and foreign net operating loss carryforwards		188.3		173.5
Restricted stock and options		33.7		39.3
Lease liabilities		179.1		—
Other		52.8		52.8
Total		787.4		625.3
Deferred income tax liabilities:
Property, plant and equipment		1,885.5		1,840.5
Deductible intangibles and goodwill		841.5		914.7
Inventory reserves		216.2		188.3
Deferred gain		272.2		275.2
Basis difference in joint ventures		33.8		33.1
Right-of-use assets		163.8		—
Total		3,413.0		3,251.8
Valuation allowances		257.5		218.0
Net deferred income tax liability	$	2,883.1	$	2,844.5

Deferred taxes are recorded as follows in the consolidated balance sheet (in millions):

	September 30,
	2020		2019
Long-term deferred tax asset ⁽¹⁾	$	33.8	$	33.5
Long-term deferred tax liability		2,916.9		2,878.0
Net deferred income tax liability	$	2,883.1	$	2,844.5

⁽¹⁾	The long-term deferred tax asset is presented in Other assets on the consolidated balance sheets.

The following table represents a summary of the valuation allowances against deferred tax assets for fiscal 2020, 2019 and 2018 (in millions):

	2020			2019			2018
Balance at beginning of fiscal year	$	218.0		$	229.4		$	219.1
Increases		46.2			25.4			50.8
Allowances related to purchase accounting⁽¹⁾		—			0.8			0.1
Reductions		(6.7	)		(37.6	)		(40.6	)
Balance at end of fiscal year	$	257.5		$	218.0		$	229.4

⁽¹⁾	Amounts in fiscal 2019 relate to the KapStone Acquisition. Amounts in fiscal 2018 relate to the MPS Acquisition.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):

	2020			2019			2018
Balance at beginning of fiscal year	$	224.3		$	127.1		$	148.9
Additions related to purchase accounting⁽¹⁾		—			1.0			3.4
Additions for tax positions taken in current year⁽²⁾		5.0			103.8			3.1
Additions for tax positions taken in prior fiscal years		11.7			1.8			18.0
Reductions for tax positions taken in prior fiscal years⁽²⁾		(16.7	)		(0.5	)		(5.3	)
Reductions due to settlement ⁽³⁾		—			(4.0	)		(29.4	)
Reductions for currency translation adjustments		(8.8	)		(1.7	)		(9.6	)
Reductions as a result of a lapse of the applicable statute of limitations		(8.8	)		(3.2	)		(2.0	)
Balance at end of fiscal year	$	206.7		$	224.3		$	127.1

⁽¹⁾	^{Amounts in fiscal 2019 relate to the KapStone Acquisition. Amounts in fiscal 2018 relate to the MPS Acquisition.}

⁽²⁾	^{Additions for tax positions taken in fiscal 2019 and reductions taken in fiscal 2020 include primarily positions taken related to foreign subsidiaries.}

⁽³⁾	Amounts in fiscal 2019 relate to the settlements of state and foreign audit examinations. Amounts in fiscal 2018 relate to the settlement of state audit examinations and federal and state amended returns filed related to affirmative adjustments for which there was a reserve.