Income Taxes

6 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Effective Tax Rate

For the three and six months ended 31 March 2025, our consolidated income statements include an income tax benefit of $505.8 and $365.1, respectively, compared to an income tax expense of $130.5 and $265.9 for the comparative prior year periods. The tax benefit in fiscal year 2025 represents an effective tax rate of 22.5% and 25.1% on the pre-tax losses reported for the three and six months ended 31 March 2025, respectively. The tax expense in fiscal year 2024 represented an effective rate of 18.3% and 18.1% on the pre-tax income reported for the three and six months ended 31 March 2024, respectively. The current year rate was primarily impacted by the $2.9 billion pre-tax charge for business and asset actions and other items as further discussed below.

Our estimates related to the items discussed below reflect our best judgment based on information available at the time the items were recorded. The amount and timing of final settlement of these items may differ from our current estimates, which could impact our tax provision in future periods. Similarly, impacts recognized in future periods may impact period tax costs and benefits.

Business and Asset Actions

During the second quarter of fiscal year 2025, we recorded charges for project cancellations and other cost reduction measures as described in Note 4, Business and Asset Actions. As a result of these strategic initiatives, we recorded a pre-tax charge of $2.9 billion. The related net tax benefit of $640.6 recorded during the second quarter includes a cost of $22.5 to establish reserves for uncertain tax positions related to the deductibility of business and asset actions incurred in foreign jurisdictions as well as a cost of $13.1 primarily related to lower U.S. tax benefits for foreign-derived income. We also incurred a $41.8 increase in our valuation allowance related to tax benefits for foreign business and asset actions for which we could not recognize an income tax benefit.

Tax Reform Adjustment Related to Deemed Foreign Dividends

During the second quarter of fiscal year 2025, we recorded a net income tax benefit of $34.9 related to our intent to file a refund claim after a review of several U.S. Tax Court cases regarding the U.S. taxation of deemed foreign dividends in the transition year of the U.S. Tax Cuts and Jobs Act (our fiscal year 2018). While we were not a party to these cases, the opinions resulted in a change to our intent to pursue a refund claim. The $34.9 income tax benefit is net of a $67.8 reserve for an uncertain tax position related to the calculation of the refund amount.

Tax on Repatriation of Foreign Earnings

During the second quarter of fiscal year 2025, we recorded an income tax expense of $31.4 related to estimated withholding taxes on foreign earnings that we no longer intend to indefinitely reinvest. There were no other changes to our assumptions regarding the reinvestment of foreign earnings during the first six months of fiscal year 2025.

Shareholder Activism-Related Costs

During the first six months of fiscal year 2025, we incurred costs of $61.3 related to a proxy contest led by an activist shareholder as further discussed in Note 17, Supplemental Information. The related net tax benefit recorded during the first half of fiscal year 2025 was $8.4.

Cash Paid for Taxes, Net of Refunds

Income tax payments, net of refunds, were $710.1 and $321.8 for the six months ended 31 March 2025 and 2024, respectively. Our income tax payments increased in fiscal year 2025 primarily due to tax payments related to the gain on the sale of our LNG business in fiscal year 2024.