On 22 December 2017, the United States enacted the U.S. Tax Cuts and Jobs Act (“Tax Act” or "Tax reform") which significantly changed existing U.S. tax laws, including a reduction in the federal corporate income tax rate from 35% to 21%, a deemed repatriation tax on unremitted foreign earnings, as well as other changes. Our consolidated income statements for the twelve months ended 30 September 2018 reflect a discrete net tax expense of $180.6 and a $28.5 reduction in equity affiliate income for the impacts of the Tax Act. The $180.6 includes a $392.4 cost comprised of $322.1 for the deemed repatriation tax and $70.3 primarily for additional foreign taxes on the repatriation of foreign earnings. This cost is partially offset by a $211.8 benefit primarily from the re-measurement of our net U.S. deferred tax liabilities at the lower corporate tax rate.

In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional estimates when a company does not have the necessary information available, prepared or analyzed in reasonable detail to complete its accounting for the effect of the changes in the Tax Act. We are reporting the $392.4 cost of deemed repatriation tax and foreign repatriation taxes and the $211.8 re-measurement of our net U.S. deferred tax liabilities provisionally based upon reasonable estimates as of 30 September 2018. The impacts are not yet finalized as they are dependent on factors and analysis not yet known or fully completed, including but not limited to, changes in our estimates of book to U.S. tax adjustments for the earnings and foreign taxes of foreign and domestic entities, as well as our ongoing analysis of the Tax Act. Estimates used in the provisional amounts include earnings, cash positions, foreign taxes and withholding taxes attributable to foreign subsidiaries as well as the anticipated reversal pattern of gross deferred balances. We are continuing to gather additional information and expect to complete our accounting by the first quarter of fiscal year 2019, within the prescribed one-year measurement period.

Due to the Company’s fiscal year, certain amounts cannot be finalized until the completion and filing of the Company’s U.S. federal 2018 tax return, which is due in the fourth quarter of fiscal year 2019, and any changes to the tax positions reflected in those returns could result in an adjustment to the impact of the Tax Act. In addition to final calculations of the earnings and taxes of foreign entities that would impact the deemed repatriation tax, estimates that are timing-related may result in adjustments due to the reduction of the U.S. tax rate. Foreign audit settlements, as well as future regulatory guidance, could also significantly impact the deemed repatriation tax.

We have historically asserted our intention to indefinitely reinvest foreign earnings in certain foreign subsidiaries. We have reevaluated our historic assertion as a result of enactment of the Tax Act and adjusted our position relative to the indefinitely reinvested earnings of various foreign subsidiaries. The impact of these changes is included in the $70.3 for additional foreign taxes on the repatriation of foreign earnings.

The Tax Act also enacted new provisions related to the taxation of foreign operations, known as Global Intangible Low Tax Income or (“GILTI”). We have elected as an accounting policy to account for GILTI as a period cost when incurred. This and various other provisions of the Tax Act do not become effective until fiscal year 2019 and did not impact our tax provision in fiscal year 2018. We have also elected as an accounting policy to record within income tax expense transaction gains and losses on foreign currency denominated withholding tax liabilities.

As a fiscal year-end taxpayer, certain provisions of the Tax Act become effective in our fiscal year 2018 while other provisions do not become effective until fiscal year 2019. The corporate tax rate reduction is effective as of 1 January 2018 and, accordingly, reduces our 2018 fiscal year U.S. federal statutory rate to a blended rate of approximately 24.5%. The 21% federal tax rate will apply to our fiscal year ended 30 September 2019 and each year thereafter.



	2018			2017			2016
Current Tax Provision
Federal		$305.1			$62.8			$171.0
State	17.7			7.0			21.2
Foreign	256.9			229.1			178.6
	579.7			298.9			370.8
Deferred Tax Provision
Federal	(121.7		)	1.4			45.0
State	12.5			6.0			2.8
Foreign	53.8			(45.4		)	14.0
	(55.4		)	(38.0		)	61.8
Income Tax Provision		$524.3			$260.9			$432.6



(Percent of income before taxes)	2018		2017		2016
U.S. federal statutory tax rate	24.5	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.0		1.0		1.2
Income from equity affiliates	(2.1	)	(2.0	)	(3.3	)
Foreign tax differentials	(1.0	)	(7.9	)	(6.6	)
Tax on foreign repatriated earnings	(.4	)	(2.2	)	(3.1	)
Domestic production activities	(.4	)	(.8	)	(.8	)
Share-based compensation	(1.0	)	(1.2	)	—
Tax reform repatriation	19.5		—		—
Tax reform rate change and other	(11.1	)	—		—
Tax restructuring benefit	(1.8	)	—		—
Non-deductible goodwill impairment charge	—		3.6		—
Non-U.S. subsidiary tax election	—		(7.7	)	—
Business separation costs	—		.2		4.2
Other	(1.2	)	.4		1.2
Effective Tax Rate	26.0	%	18.4	%	27.8	%

Foreign tax differentials represent the differences between foreign earnings subject to foreign tax rates lower than the U.S. federal statutory tax rate. Some of our foreign earnings are subject to local country tax rates that are below the U.S. federal statutory rate and include tax holidays and incentives. As a result of the reduction in the federal corporate income tax rates under the Tax Act our effective non-U.S. tax rate is now closer to our blended current year U.S. statutory rate of 24.5%.

Tax on foreign repatriated earnings includes benefits and costs related to U.S. and additional foreign taxation on the current and future repatriation of foreign earnings and a U.S. benefit for related foreign tax credits. As a result of the Tax Act, the impact on our effective rate from repatriations and credits has been significantly reduced. Due to the effective date of provisions under the Tax Act, certain benefits reported in fiscal year 2018 will not recur in fiscal year 2019.

During the first quarter of fiscal year 2017, we adopted new accounting guidance that requires excess tax benefits and deficiencies from share-based compensation to be recognized in the consolidated income statements rather than in additional paid-in capital on the consolidated balance sheets. As a result of applying this change prospectively, we recognized $21.5 and $17.6 of excess tax benefits in our provision for income taxes during fiscal year 2018 and 2017, respectively.

In 2017, the effective tax rate was impacted by a tax election made with respect to a Chilean holding company resulting in an income tax benefit of $111.4 on tax losses related to investments in Chile. The effective tax rate was also impacted by a goodwill impairment charge of $145.3 for which no tax benefits were available. See Note 10, Goodwill, for additional information regarding the impairment charge.

In 2016, the effective tax rate was impacted by tax costs of $51.8 incurred in anticipation of the tax-free spin-off of Versum, primarily for a dividend declared during the third quarter of 2016 to repatriate $443.8 from a subsidiary in South Korea to the U.S. Previously, most of these foreign earnings were considered to be indefinitely reinvested. In addition, a tax benefit was not available on a significant portion of the business separation costs. See Note 4, Materials Technologies Separation, for additional information.



30 September	2018			2017
Gross Deferred Tax Assets
Retirement benefits and compensation accruals		$153.1			$370.1
Tax loss carryforwards	143.5			64.5
Tax credits and other tax carryforwards	17.1			76.1
Reserves and accruals	42.5			88.2
Currency losses	3.8			20.7
Other	45.4			37.2
Valuation allowance	(105.0		)	(107.7		)
Deferred Tax Assets	300.4			549.1
Gross Deferred Tax Liabilities
Plant and equipment	811.8			1,035.6
Unremitted earnings of foreign entities	36.1			20.9
Partnership and other investments	16.3			5.4
Intangible assets	84.3			81.9
Other	5.6			9.2
Deferred Tax Liabilities	954.1			1,153.0
Net Deferred Income Tax Liability		$653.7			$603.9

The various components of deferred tax assets and liabilities, including plant and equipment, retirement benefits and compensation accruals, and reserves and accruals were reduced by the re-measurement of our U.S. deferred tax accounts to the lower U.S. corporate tax rate. Tax loss carryforwards increased primarily due to the sale of plant and equipment related to our EfW business. The sale converted these assets into capital losses which are subject to a full valuation allowance. In addition, deferred tax liabilities related to plant and equipment also includes an increase due to the impact of the immediate expensing provision allowed for under the Tax Act. The balance of unremitted earnings of foreign entities and partnership and other investments were increased by additional foreign withholding tax liability recorded as a result of the Tax Act, net of tax payments. Retirement benefits and compensation accruals are also impacted significantly by the changes in plan assets and benefit obligations that have been recognized in other comprehensive income. See Note 16, Retirement Benefits, for additional information.

In fiscal year 2018 we utilized the balance of our federal tax credit carryforward against the deemed repatriation tax. Of the $340.6 of foreign net operating loss carryforwards, $121.8 have indefinite carryforward periods. Of the $21.6 foreign tax credits, $16.4 have indefinite carryforward periods.

The valuation allowance as of 30 September 2018 of $105.0, primarily related to the tax benefit of foreign loss carryforwards of $56.0 as well as foreign capital losses of $47.9 that were generated from the loss recorded on the exit from the Energy-from-Waste business in 2016. If events warrant the reversal of the valuation allowance, it would result in a reduction of tax expense. We believe it is more likely than not that future earnings and reversal of deferred tax liabilities will be sufficient to utilize our deferred tax assets, net of existing valuation allowance, at 30 September 2018.

As a result of the Tax Act we recorded $322.1 of federal income tax from the deemed repatriation tax on approximately $5.8 billion of previously undistributed earnings from our foreign subsidiaries and corporate joint ventures. These earnings are now eligible to be repatriated to the U.S. with reduced U.S. tax impacts. However, such earnings may be subject to foreign withholding and other taxes. We record foreign and U.S. income taxes on the undistributed earnings of our foreign subsidiaries and corporate joint ventures unless those earnings are indefinitely reinvested. The cumulative undistributed earnings that are considered to be indefinitely reinvested in foreign subsidiaries and corporate joint ventures are included in retained earnings on the consolidated balance sheets and amounted to $3.2 billion as of 30 September 2018. An estimated $420.4 in additional foreign withholding and other income taxes would be due if these earnings were remitted as dividends.



Unrecognized Tax Benefits	2018			2017			2016
Balance at beginning of year		$146.4			$90.2			$83.8
Additions for tax positions of the current year	26.4			47.5			12.5
Additions for tax positions of prior years	119.2			16.1			2.9
Reductions for tax positions of prior years	(41.3		)	(4.0		)	—
Settlements	(14.2		)	(2.0		)	(5.6		)
Statute of limitations expiration	(2.6		)	(3.2		)	(2.9		)
Foreign currency translation	(.3		)	1.8			(.5		)
Balance at End of Year		$233.6			$146.4			$90.2

Interest and penalties related to unrecognized tax benefits are recorded as a component of income tax expense and totaled ($2.4), $3.7, and $1.8 in fiscal years 2018, 2017, and 2016, respectively. Our accrued balance for interest and penalties was $8.4 and $12.1 as of 30 September 2018 and 2017, respectively.

The additions for tax positions of prior years of $119.2 relates primarily to uncertain state tax filing positions taken related to the sale of PMD. Additions for tax positions of the current year of $26.4 included uncertain tax positions related to the restructuring of foreign subsidiaries and reserves for ongoing transfer pricing uncertainties.

On 17 April 2018, we received a final audit settlement agreement that resolved uncertainties related to unrecognized tax benefits of $43.1, including interest. This settlement primarily related to tax positions taken in conjunction with the disposition of our Homecare business in 2012. As a result, we recorded an income tax benefit of $25.6, including interest, in income from discontinued operations during 2018. The settlement also resulted in an income tax benefit of approximately $9.1, including interest, in continuing operations for the release of tax reserves on other matters. The reduction in prior year positions and settlement payments also reflect the settlement of U.S. federal tax audits for 2012 through 2014 reported in the first quarter of the year.

We are currently under examination in a number of tax jurisdictions, some of which may be resolved in the next twelve months. As a result, it is reasonably possible that a change in the unrecognized tax benefits may occur during the next twelve months. However, quantification of an estimated range cannot be made at this time.



Major Tax Jurisdiction	Open Tax Years
North America
United States – Federal	2015	-	2018
United States – All States	2011	-	2018
Canada	2014	-	2018
Europe
France	2015	-	2018
Germany	2013	-	2018
Netherlands	2012	-	2018
Spain	2015	-	2018
United Kingdom	2014	-	2018
Asia
China	2013	-	2018
South Korea	2010	-	2018
Taiwan	2013	-	2018
Latin America
Chile	2015	-	2018