On 22 December 2017, the United States enacted the U.S. Tax Cuts and Jobs Act (the “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 reflect a discrete net income tax expense of $43.8 and $180.6 in fiscal years 2019 and 2018, respectively, related to impacts of the Tax Act.

In fiscal year 2019, our income tax expense reflects the reversal of a non-recurring $56.2 benefit recorded in fiscal year 2018 related to the U.S. taxation of deemed foreign dividends. This was partially offset by a benefit of $12.4 to reduce the total expected costs of the deemed repatriation tax. The non-recurring benefit recorded in fiscal year 2018 was eliminated by regulations issued in fiscal year 2019.

In fiscal year 2018, our consolidated income statements reflect a discrete net income tax expense of $180.6 and a $28.5 reduction to equity affiliates' income for the impacts of the Tax Act. The income tax expense of $180.6 included a cost of $392.4, which included $322.1 for the deemed repatriation tax and $70.3 primarily for additional foreign taxes on the repatriation of foreign earnings. This cost was 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. The deemed repatriation tax of $322.1 included the $56.2 non-recurring benefit related to the U.S. taxation of deemed foreign dividends that was eliminated in 2019. We have historically asserted our intention to indefinitely reinvest foreign earnings in certain foreign subsidiaries. We reevaluated our historic assertions 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 recorded in fiscal year 2018.

After applying tax credits, the balance of the deemed repatriation tax obligation is $256.8, which we are paying in installments over seven remaining years. As of 30 September 2019, we recorded $215.4 of this obligation on our consolidated balance sheets in noncurrent liabilities.

While our accounting for the provisions of the Tax Act is not provisional, further adjustments to the deemed repatriation tax could result from future U.S. or foreign tax examinations of the years impacted by the calculation or from the issuance of additional federal or state guidance.

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



	2019		2018			2017
Current Tax Provision
Federal		$163.7		$305.1			$62.8
State	23.3		17.7			7.0
Foreign	235.5		256.9			229.1
Total Current Tax Provision	422.5		579.7			298.9
Deferred Tax Provision
Federal	9.7		(121.7		)	1.4
State	2.4		12.5			6.0
Foreign	45.5		53.8			(45.4		)
Total Deferred Tax Provision	57.6		(55.4		)	(38.0		)
Total Income Tax Provision		$480.1		$524.3			$260.9

Total company income tax payments, net of refunds, were $324.3, $372.0, and $1,348.8 in fiscal years 2019, 2018, and 2017, respectively. Tax payments were higher in fiscal year 2017 due to taxes related to the $2,870 gain on the sale of PMD. Refer to Note 4, Discontinued Operations, for additional information.

The effective tax rate equals the income tax provision divided by income from continuing operations before taxes. A reconciliation of the differences between the United States federal statutory tax rate and the effective tax rate is as follows:



(Percent of income before taxes)	2019		2018		2017
U.S. federal statutory tax rate	21.0	%	24.5	%	35.0	%
State taxes, net of federal benefit	1.0		1.0		1.0
Income from equity affiliates	(2.0	)	(2.1	)	(2.0	)
Foreign tax differentials	1.0		(1.0	)	(7.9	)
Tax on foreign repatriated earnings	.1		(.4	)	(2.2	)
Domestic production activities	—		(.4	)	(.8	)
Share-based compensation	(.6	)	(1.0	)	(1.2	)
Tax reform repatriation	1.9		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
Other	(1.4	)	(1.2	)	.4
Effective Tax Rate	21.0	%	26.0	%	18.4	%

Foreign tax differentials represent the differences between foreign earnings subject to foreign tax rates that are different than 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 higher than our fiscal year 2019 U.S. statutory rate of 21.0%. As a result of the lower statutory rate in fiscal year 2019 versus fiscal year 2018, the net impact of foreign tax rates reflects the cost of foreign rates higher than the U.S. federal statutory rate.

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. In addition, the Tax Act also enacted new provisions related to the taxation of foreign operations, known as Global Intangible Low Tax Income (“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 did not become effective until fiscal year 2019 and did not impact our tax provision in fiscal year 2018.

In fiscal year 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. Refer to Note 11, Goodwill, for additional information regarding the impairment charge.



30 September	2019			2018
Gross Deferred Tax Assets
Retirement benefits and compensation accruals		$227.1			$153.1
Tax loss carryforwards	140.6			143.5
Tax credits and other tax carryforwards	31.1			17.1
Reserves and accruals	69.6			42.5
Currency losses	—			3.8
Other	57.7			45.4
Valuation allowance	(92.1		)	(105.0		)
Deferred Tax Assets	434.0			300.4
Gross Deferred Tax Liabilities
Plant and equipment	954.6			811.8
Currency gains	23.9			—
Unremitted earnings of foreign entities	31.0			36.1
Partnership and other investments	14.8			16.3
Intangible assets	80.0			84.3
Other	8.3			5.6
Deferred Tax Liabilities	1,112.6			954.1
Net Deferred Income Tax Liability		$678.6			$653.7

Retirement benefits and compensation accruals are impacted significantly by the changes in plan assets and benefit obligations that have been recognized in other comprehensive income. Refer to Note 17, Retirement Benefits, for additional information. Deferred tax liabilities related to plant and equipment increased due to the impact of an increase in accelerated tax depreciation deductions in excess of book depreciation in multiple jurisdictions. The deferred tax component for currency transactions moved into an overall deferred tax liability position due primarily to currency movements on hedging transactions as several foreign based currencies weakened against the U.S. dollar in fiscal year 2019. Reserves and accruals were impacted by an increase in tax deferred deductions related to the timing of recognizing accruals for local tax and accounting purposes.

The generation of $13.3 in excess U.S. foreign tax credits in fiscal year 2019 increased the balance of the tax credits and other tax carryforwards component. Of the $20.8 foreign tax credits, $5.8 have indefinite carryforward periods.



Jurisdiction	Gross Loss Carryforward		Expiration Period
U.S. State Net Operating Loss		$296.3	2020 - 2034
U.S. Federal Capital Loss	1.8		2023
Foreign Net Operating Loss	352.6		2020 - 2029; Indefinite
Foreign Capital Loss	262.5		Indefinite

The valuation allowance as of 30 September 2019 of $92.1 primarily related to $42.8 of foreign credits and loss carryforwards as well as $44.6 related to foreign capital losses that were generated from the loss recorded on the exit from the EfW 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, as of 30 September 2019.

As a result of the Tax Act, we recorded $373.2 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 $4.2 billion as of 30 September 2019. An estimated $359.6 in additional foreign withholding and other income taxes would be due if these earnings were remitted as dividends.



Unrecognized Tax Benefits	2019			2018			2017
Balance at beginning of year		$233.6			$146.4			$90.2
Additions for tax positions of the current year	7.8			26.4			47.5
Additions for tax positions of prior years	14.2			119.2			16.1
Reductions for tax positions of prior years	(14.7		)	(41.3		)	(4.0		)
Settlements	(1.5		)	(14.2		)	(2.0		)
Statute of limitations expiration	(3.9		)	(2.6		)	(3.2		)
Foreign currency translation	(3.8		)	(.3		)	1.8
Balance at End of Year		$231.7			$233.6			$146.4

As of 30 September 2019 and 2018, we had $231.7 and $233.6 of unrecognized tax benefits, excluding interest and penalties, respectively, of which $75.0 and $88.6, respectively, would impact the effective tax rate from continuing operations if recognized.

Interest and penalties related to unrecognized tax benefits are recorded as a component of income tax expense and totaled $12.0, ($2.4), and $3.7 in fiscal years 2019, 2018, and 2017, respectively. Our accrued balance for interest and penalties was $19.5 and $8.4 as of 30 September 2019 and 2018, respectively.

In fiscal year 2018, $119.2 in additions for tax positions of prior years related primarily to uncertain state tax filing positions taken related to the sale of PMD. Additions for tax positions of the current year in fiscal year 2018 of $26.4 included uncertain tax positions related to the restructuring of foreign subsidiaries and reserves for ongoing transfer pricing uncertainties.

In fiscal year 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 as of the date of this report.



Major Tax Jurisdiction	Open Tax Years
North America
United States – Federal	2016	-	2019
United States – State	2010	-	2019
Canada	2015	-	2019
Europe
France	2016	-	2019
Germany	2013	-	2019
Netherlands	2018	-	2019
Spain	2015	-	2019
United Kingdom	2015	-	2019
Asia
China	2014	-	2019
South Korea	2010	-	2019
Taiwan	2014	-	2019
Latin America
Chile	2016	-	2019