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Income Taxes
 12 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
Note 7 — Income Taxes
Income before income taxes comprises the following:
202120202019
Domestic$647 $424 $330 
Foreign1,342 243 71 
Total income before income taxes$1,989 $667 $401 

The provisions for income taxes consist of the following:
202120202019
Current expense (benefit):
Federal$(48)$(85)$52 
State7 4 14 
Foreign85 70 70 
Total current (benefit) expense44 (11)136 
Deferred expense (benefit):
Federal168 135 3 
State48 19 4 
Foreign262 (8)(50)
Total deferred expense (benefit)478 146 (43)
Total income tax expense$522 $135 $93 

Federal income taxes for Fiscal 2019 are net of foreign tax credits of $10. There were no foreign tax credits utilized in Fiscal 2021 or Fiscal 2020.
A reconciliation from the U.S. federal statutory tax rate to our effective tax rate is as follows:
202120202019
U.S. federal statutory tax rate21.0 %21.0 %21.0 %
Difference in tax rate due to:
Effect of U.S. tax legislation(0.8)(4.7)0.2 
Effect of tax rate changes - International(1.3)0.3 (0.5)
Noncontrolling interests not subject to tax— — (2.7)
State income taxes, net of federal benefit1.9 2.8 3.6 
Valuation allowance adjustments1.0 — — 
Effects of foreign operations4.6 1.3 1.8 
Excess tax benefits on share-based payments(0.1)(0.2)(1.0)
Other, net(0.1)(0.3)0.7 
Effective tax rate26.2 %20.2 %23.1 %
In February 2021, tax legislation was enacted in Italy which allowed the Company to align book basis with tax basis on certain assets in exchange for paying a three percent substitute tax payment payable in three annual installments. This election resulted in a $23 net benefit in Fiscal 2021 which will result in incremental tax basis that will be deductible in future periods.

On March 27, 2020 the CARES Act was enacted into law. The primary impact of the legislation was the change in federal net operating loss carryback rules which allowed the Company’s U.S. federal tax losses generated in Fiscal 2021 and Fiscal 2020 to be carried back to Fiscal 2016 and Fiscal 2015. The carryback of our Fiscal 2021 and Fiscal 2020 U.S. federal tax losses from a 21% rate environment to offset taxable income in Fiscal 2016 and Fiscal 2015 in a 35% rate environment generated incremental benefits of $15 and $32, respectively. A $90 refund claim for the Fiscal 2020 carryback to Fiscal 2015 was filed and remains outstanding from the IRS. The Fiscal 2021 carryback to Fiscal 2016 will generate an expected $38 refund. Both are included in “Income taxes receivable” on the Consolidated Balance Sheet at September 30, 2021. On July 20, 2020, the Treasury Department issued final regulations under IRC Section 951A permitting a taxpayer to elect to exclude, from its inclusion of GILTI, income subject to a high effective rate of foreign tax. The impact of these final regulations reduced U.S. tax of foreign source income in Fiscal 2021 and Fiscal 2020.

Our effective tax rate is subject to the impact of changes to the taxation of foreign source income made by the TCJA and the high tax exception regulations issued in July 2020. Income tax expense for Fiscal 2021, Fiscal 2020 and Fiscal 2019 includes $8, $0 and $2, respectively, of GILTI taxes that are treated as current period costs and carry no related deferred taxes.
Pennsylvania and West Virginia utility ratemaking practices permit the flow through to ratepayers of state tax benefits resulting from accelerated tax depreciation. For Fiscal 2021, Fiscal 2020 and Fiscal 2019, the beneficial effects of state tax flow through of accelerated depreciation reduced income tax expense by $9, $11, and $7, respectively.
Deferred tax liabilities (assets) comprise the following at September 30:
20212020
Excess book basis over tax basis of property, plant and equipment$937 $830 
Utility regulatory assets105 112 
Intangible assets and goodwill77 107 
Derivative instrument assets322 — 
Other36 32 
Gross deferred tax liabilities1,477 1,081 
Investment in AmeriGas Partners(102)(216)
Pension plan liabilities(29)(48)
Employee-related benefits(45)(46)
Operating loss carryforwards(53)(34)
Foreign tax credit carryforwards(79)(81)
Utility regulatory liabilities(102)(94)
Derivative instrument liabilities— (26)
Utility environmental liabilities(16)(16)
Other(107)(54)
Gross deferred tax assets(533)(615)
Deferred tax assets valuation allowance138 105 
Net deferred tax liabilities$1,082 $571 
At September 30, 2021, we carried foreign net operating loss carryforwards of $10 and $19 principally relating to Flaga and certain subsidiaries of UGI France, with no expiration dates and $5 in the Netherlands expiring in 2027. We have state net operating loss carryforwards primarily relating to certain subsidiaries that approximate $606 and expire through 2041. We also have federal operating loss carryforwards of $24 for Mountaintop Energy Holding, LLC and $7 for certain operations of AmeriGas Propane. At September 30, 2021, deferred tax assets relating to operating loss carryforwards amounted to $52 related to various UGI subsidiaries.
Valuation allowances against deferred tax assets exist for foreign tax credit carryforwards, net operating loss carryforwards of foreign subsidiaries, capital loss carryforwards and a notional interest deduction. The valuation allowance for all deferred tax assets increased by $33 in Fiscal 2021, which included a $30 increase related to future capital losses from the PennEast and Hudson investments, and a $10 increase in a notional interest deduction carryover, partially offset by the release of $10 against FTC’s that will be realizable in the future.
The valuation allowance for all deferred tax assets decreased by $14 in Fiscal 2020 largely related to a $16 increase in a notional interest deduction carryover.
We conduct business and file tax returns in the U.S., numerous states, local jurisdictions and in France and certain other European countries. Our U.S. federal income tax returns are settled through the 2017 tax year, our French tax returns are settled through the 2017 tax year, our Austrian tax returns are settled through 2016 and our other European tax returns are effectively settled for various years from 2013 to 2018. State and other income tax returns in the U.S. are generally subject to examination for a period of three to five years after the filing of the respective returns.
The Company’s unrecognized tax benefits including amounts related to accrued interest, which if subsequently recognized would be recorded as a benefit to income taxes, amounted to $4, $4, and $11 at September 30, 2021, 2020 and 2019, respectively. Activity related to these unrecognized tax benefits was not material for all periods presented.