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Taxes on Income
 12 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Taxes on Income Taxes on Income
Taxes on income were as follows:
(in millions)
for the fiscal years ended September 30,202520242023
Current expense
Federal$140.6 $212.0 $148.1 
State51.5 54.0 55.6 
Non-U.S.93.0 73.9 67.1 
Deferred (benefit) expense(47.2)(124.6)41.5 
Total$237.9 $215.3 $312.3 
Income before taxes consisted of the following:
(in millions)
for the fiscal years ended September 30,202520242023
U.S.$538.2 $286.3 $819.2 
Non-U.S. and other1
248.6 536.9 518.8 
Total$786.8 $823.2 $1,338.0 
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1    Other includes income (loss) from consolidated investment products and amounts not subject to tax.
The significant components of deferred tax assets and deferred tax liabilities were as follows:
(in millions)
as of September 30,20252024
Deferred Tax Assets
Capitalized mixed service costs$127.5 $162.6 
Net operating loss and state credit carry-forwards328.3 325.8 
Deferred compensation and benefits209.3 210.5 
Foreign tax credit carry-forwards70.4 81.6 
Operating lease liability
199.1 186.4 
Debt premium43.7 48.6 
Other118.9 116.1 
Total deferred tax assets1,097.2 1,131.6 
Valuation allowance(297.1)(290.5)
Deferred tax assets, net of valuation allowance800.1 841.1 
Deferred Tax Liabilities
Goodwill and other purchased intangibles697.7 800.8 
Right of use asset
151.0 160.3 
Other129.7 88.8 
Total deferred tax liabilities978.4 1,049.9 
Net Deferred Tax Liability$178.3 $208.8 
Deferred income tax assets and liabilities that relate to the same tax jurisdiction are presented net on the consolidated balance sheets. The components of the net deferred tax liability were classified in the consolidated balance sheets as follows:
(in millions)
as of September 30,20252024
Other assets$83.3 $76.1 
Deferred tax liabilities261.6 284.9 
Net Deferred Tax Liability$178.3 $208.8 
Included in the Company’s net deferred tax liability were the deferred tax effects associated with the fair value of assets acquired and liabilities assumed from the acquisition of Legg Mason and acquired attributes that carry over to post-acquisition tax periods, including U.S. state and foreign net operating losses and foreign tax credits. Utilization of the U.S. state net operating losses and federal credit carry-forwards may be subject to annual limitations due to ownership change provisions under Section 382 of the Internal Revenue Code. Foreign tax credits can only be used to offset tax attributable to foreign source income.
At September 30, 2025, there were $121.4 million of non-U.S. tax effected net operating loss and capital loss carry-forwards which expire between fiscal years 2026 and 2045. In addition, there were $118.3 million in tax effected state net operating loss carry-forwards that expire between fiscal years 2026 and 2044, with some having an indefinite carry-forward period. The Company also has federal net operating losses of $9.5 million, the majority of which will carry-forward indefinitely and $70.4 million of foreign tax credit carry-forwards that expire between fiscal years 2026 and 2029.
The valuation allowance increased $6.6 million in fiscal year 2025, primarily related to non-U.S. net operating loss utilization. At September 30, 2025, the valuation allowance of $297.1 million was related to $172.3 million for federal, state, and foreign net operating loss carry-forwards, $52.3 million due to uncertainty of realizing the benefit of foreign tax credits, $45.0 million for capital losses, and $27.5 million for other state deferred taxes.
A reconciliation of the amount of tax expense at the federal statutory rate and taxes on income as reflected in the consolidated statements of income is as follows:
(in millions)
for the fiscal years ended September 30,202520242023
Federal taxes at statutory rate$165.2 21.0%$172.9 21.0%$281.0 21.0%
State taxes, net of federal tax effect
25.5 3.2%42.8 5.2%71.3 5.3%
Tax reserve (release) for audit settlements, net of valuation allowance
(4.8)(0.6%)0.5 0.1%(11.4)(0.9%)
Effect of net income attributable to noncontrolling interests(5.0)(0.6%)(29.7)(3.6%)(22.0)(1.6%)
Effect of non-U.S. operations44.5 5.7%4.0 0.5%(14.7)(1.1%)
Capital loss on investments, net of valuation allowance
7.5 1.0%7.4 0.9%(8.8)(0.7%)
Foreign tax credit valuation allowance release
(12.6)(1.6)%5.1 0.6%7.2 0.5%
Other
17.6 2.2 %12.3 1.5%9.7 0.8%
Tax Provision
$237.9 30.2%$215.3 26.2%$312.3 23.3%
A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:
(in millions)
for the fiscal years ended September 30,202520242023
Balance at beginning of year$133.5 $138.8 $168.7 
Additions for tax positions of prior years2.5 1.2 6.1 
Reductions for tax positions of prior years(1.2)(4.9)(14.9)
Tax positions related to the current year11.1 12.1 13.3 
Settlements with taxing authorities(17.5)(6.6)(19.9)
Expirations of statute of limitations(16.5)(7.1)(14.5)
Balance at End of Year$111.9 $133.5 $138.8 
If recognized, $111.2 million for 2025, $132.8 million for 2024 and $132.2 million for 2023 would favorably affect the Company’s effective income tax rate in future periods.
The Company accrues interest and penalties related to unrecognized tax benefits in interest expense and general, administrative and other expenses. Accrued interest on uncertain tax positions at September 30, 2025 and 2024 was $25.8 million and $23.7 million, and is not presented in the unrecognized tax benefits table above. Accrued penalties at September 30, 2025 and 2024 were $1.7 million and $1.6 million.
The Company files a consolidated U.S. federal income tax return, multiple U.S. state and local income tax returns, and income tax returns in multiple non-U.S. jurisdictions. The Company is subject to examination by the taxing authorities in these jurisdictions. The Company’s major tax jurisdictions and the tax years for which the statutes of limitations have not expired are as follows: India 2003 to 2025; Brazil 2020 to 2025; Luxembourg 2019 to 2025; U.K. 2021 to 2025; U.S. federal 2020 and 2022 to 2025; the City of New York 2019 to 2025; and States of California, Florida, Massachusetts and New York 2020 to 2025.
The Company has ongoing litigation and examinations in various stages, including in the States of California and City of New York, and in Brazil, India and Italy. Examination outcomes and the timing of settlements are subject to significant uncertainty. Such settlements may involve some or all of the following: the payment of additional taxes, the adjustment of deferred taxes and/or the recognition of unrecognized tax benefits. The Company has recognized a tax benefit only for those positions that meet the more-likely-than-not recognition threshold. It is reasonably possible that the total unrecognized tax benefit as of September 30, 2025 could decrease by an estimated $12.0 million within the next twelve months as a result of the expiration of statutes of limitations in the U.S. federal and certain U.S. state and local and non-U.S. tax jurisdictions, and potential settlements with U.S. states and non-U.S. taxing authorities.
The Tax Cuts and Jobs Act which was enacted into law in the U.S. in December 2017, includes various changes to the tax law, including a permanent reduction in the corporate income tax rate and assessment of a one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiaries’ earnings. The remaining payment for the Company’s federal portion of the transition tax liability of $231.6 million will be made in fiscal year 2026.
On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was signed into law. While the Company is in the process of evaluating the impact of the Act on its consolidated financial statements, it does not expect there to be any material impact thereon.