INCOME TAXES

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

For a discussion of our income tax accounting policies and other income tax-related information see Note 2.

Income taxes

The following table details the total income tax provision/(benefit) allocation for each respective period.

	Year ended September 30,
$ in millions	2023		2022		2021
Recorded in:
Net income	$	541	$	513	$	388
Equity, arising from available-for-sale securities recorded through OCI	3		(311)		(32)
Equity, arising from cash flow hedges recorded through OCI	—		24		8
Equity, arising from currency translations, net of the impact of net investment hedges recorded through OCI	(4)		23		(10)
Total provision for income taxes	$	540	$	249	$	354

The following table details our provision/(benefit) for income taxes included in net income for each respective period.

	Year ended September 30,
$ in millions	2023		2022		2021
Current:
Federal	$	468	$	406	$	321
State and local	122		91		79
Foreign	39		32		25
Total current	$	629	$	529	$	425
Deferred:
Federal	(59)		(10)		(28)
State and local	(16)		(3)		(6)
Foreign	(13)		(3)		(3)
Total deferred	$	(88)	$	(16)	$	(37)
Total provision for income taxes	$	541	$	513	$	388

A reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is detailed in the following table.

	Year ended September 30,
	2023		2022		2021
Provision calculated at statutory rate	21.0	%	21.0	%	21.0	%
State income tax, net of federal benefit	3.9	%	3.6	%	3.6	%
Nondeductible fines and penalties	0.8	%	—	%	—	%
Nondeductible executive compensation	0.6	%	0.4	%	0.3	%
Foreign tax rate differential	0.4	%	0.2	%	0.2	%
General business tax credits (1)	(1.0)	%	(1.2)	%	(1.0)	%
(Gains)/losses on company-owned life insurance policies which are not subject to tax	(1.0)	%	1.8	%	(1.8)	%
Excess tax benefits related to share-based compensation	(0.9)	%	(1.1)	%	(0.2)	%
Solar and LIHTC investment amortization, net of tax credits received (2)	(0.4)	%	—	%	—	%
Change in uncertain tax positions	(0.1)	%	0.3	%	(0.1)	%
Other, net	0.4	%	0.4	%	(0.3)	%
Total provision for income tax	23.7	%	25.4	%	21.7	%

(1)    General business tax credits consist of credits related to foreign withholdings, research and development, wage credits, certain historic tax credits, certain LIHTC credits, and various state credits.

(2)    During the year ended September 30, 2023, we made an investment in a solar entity which qualified for tax credits and is accounted for under the proportional amortization method. For the year ended September 30, 2023, amortization of this investment, which was included in our provision for income taxes, was $86 million, and we recognized an offsetting $81 million of tax credits and $9 million of other tax benefits. The amortization of LIHTC investments accounted for under the proportional amortization method was $3 million for the year ended September 30, 2023, and the related offsetting tax credits received from LIHTC investments were $3 million. There was no such investment amortization in either of the years ended September 30, 2022 or 2021.

The following table presents our U.S. and foreign components of pre-tax income for each respective period.

	Year ended September 30,
$ in millions	2023		2022		2021
U.S.	$	2,193	$	1,907	$	1,701
Foreign	87		115		90
Pre-tax income	$	2,280	$	2,022	$	1,791

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements. These temporary differences result in taxable or deductible amounts in future years. The cumulative effects of temporary differences that give rise to significant portions of the deferred tax asset/(liability) items are detailed in the following table.

	September 30,
$ in millions	2023		2022
Deferred tax assets:
Deferred compensation	$	338	$	272
Unrealized loss associated with available-for-sale securities	310		343
Allowances for credit losses	140		106
Lease liabilities	135		121
Accrued expenses	56		54
Unrealized loss associated with loan portfolios	46		34
Net operating losses and credit carryforwards	19		8
Unrealized loss associated with foreign currency translations	5		27
Other	16		27
Total deferred tax assets	1,065		992
Less: valuation allowance	(5)		(2)
Total deferred tax assets, net of valuation allowance	1,060		990
Deferred tax liabilities:
Lease ROU assets	(141)		(118)
Goodwill and identifiable intangible assets	(131)		(126)
Property and equipment	(68)		(110)
Unrealized gain associated with cash flow hedges	(16)		(15)
Other	(1)		(5)
Total deferred tax liabilities	(357)		(374)
Net deferred tax assets	$	703	$	616
Classified as follows in the Consolidated Statements of Financial Condition:
Deferred income taxes, net	$	711	$	630
Other payables	(8)		(14)
Net deferred tax assets	$	703	$	616

We have various tax loss carryforwards that may provide future tax benefits. Related valuation allowances are established in accordance with accounting guidance for income taxes if it is management’s opinion that it is more likely than not that these benefits will not be realized. The following table presents deferred tax assets and valuation allowances relating to carryforwards for the periods indicated.

	Year ended September 30,
$ in millions	2023		2022		Expires beginning of fiscal year
Deferred tax asset:
U.S. Federal net operating losses (1)	$	8	$	5	Indefinitely
U.S. State net operating losses (1)	4		2		2026
Foreign net operating losses	7		1		2040
Total deferred tax asset related to carryforwards	$	19	$	8
Valuation allowance:
U.S. Federal net operating losses	$	1	$	1
U.S. State net operating losses	4		1
Net valuation allowance	$	5	$	2

(1)     Both the federal and state net operating loss carryfowards relate to separate company entity filings. As a result, these losses are not able to be utilized in our consolidated filings.

As of September 30, 2023, total deferred tax assets, net of a $5 million valuation allowance, aggregated to $1.06 billion. We continue to believe that the realization of our deferred tax assets is more likely than not based on expectations of future taxable income.

The $8 million and $14 million of net deferred tax liabilities included in “Other payables” on our Consolidated Statements of Financial Condition as of September 30, 2023 and 2022, respectively, primarily arose from entities in the U.K., and accordingly were not netted against balances arising from our U.S. entities.

As of September 30, 2023, we considered substantially all undistributed earnings of non-U.S. subsidiaries to be permanently reinvested. The Tax Cut and Jobs Act (“TCJA”), enacted in December 2017, reduced our incremental tax cost of repatriating offshore earnings. As a result, we have not provided for any U.S. deferred income taxes related to such subsidiaries. The TCJA instituted a territorial system of international taxation. Under the system, dividends received by a U.S. corporation from its 10%-or-greater-owned foreign subsidiaries are generally exempt from U.S. tax if attributable to non-U.S. source earnings, but are subject to tax on “Global intangible low-taxed income” which is applicable regardless of whether the income is repatriated. As of September 30, 2023, we had approximately $602 million of cumulative undistributed earnings attributable to foreign subsidiaries. Because the time and manner of repatriation is uncertain, we cannot determine the impact of local taxes, withholding taxes, and foreign tax credits associated with the future repatriation of such earnings, and therefore, cannot quantify the tax liability that would be payable in the event all such foreign earnings are repatriated.

As of September 30, 2023, the current tax receivable, which was included in “Other receivables, net” on our Consolidated Statements of Financial Condition, was $9 million, and the current tax payable, which was included in “Other payables,” was $17 million. As of September 30, 2022, the current tax receivable was $7 million and the current tax payable was $28 million.

Uncertain tax positions

We recognize the accrual of interest and penalties related to income tax matters in “Interest expense” and “Other” expense, respectively. As of September 30, 2023 and 2022, accrued interest and penalties were $12 million and $9 million, respectively.

The following table presents the aggregate changes in the balances for uncertain tax positions.

	Year ended September 30,
$ in millions	2023		2022		2021
Uncertain tax positions beginning of year	$	43	$	36	$	45
Increases for tax positions related to the current year	5		5		5
Increases for tax positions related to prior years	4		10		2
Decreases for tax positions related to prior years	(2)		(1)		(7)
Decreases due to lapsed statute of limitations	(8)		(7)		(5)
Decreases related to settlements	(1)		—		(4)
Uncertain tax positions end of year	$	41	$	43	$	36

The total amount of uncertain tax positions that, if recognized, would impact the effective tax rate (the items included in the preceding table after considering the federal tax benefit associated with any state tax provisions) was $35 million, $38 million, and $31 million at September 30, 2023, 2022 and 2021, respectively.  We anticipate that the uncertain tax position liability balance will decrease by approximately $6 million over the next 12 months due to expiration of statutes of limitations of federal and state tax returns.

RJF and its domestic subsidiaries are included in the consolidated income tax returns of RJF in the U.S. federal jurisdiction and various consolidated states. Our subsidiaries also file separate income tax returns in various state and local and foreign jurisdictions. With few exceptions, we are generally no longer subject to U.S. federal, state and local, or foreign income tax examination by tax authorities for fiscal years prior to fiscal 2020, with the fiscal year 2018 limited by a provision of the TCJA described as follows. Certain state and local and foreign tax returns are currently under various stages of audit and appeals processes. Our fiscal 2018 federal tax return remains open for limited examination under the TCJA. The TCJA provides the Internal Revenue Service a six year limitation period to assess the net transition tax liability reported by the firm.