Income Taxes

12 Months Ended

Aug. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for Income Taxes

Income (loss) before income tax expense is summarized below (in millions):

	Fiscal Year Ended August 31,
	2024		2023		2022
Domestic	$	(366)	$	(315)	$	(116)
Foreign	2,117		1,577		1,347
Total	$	1,751	$	1,262	$	1,231

Income tax expense (benefit) is summarized below (in millions):

	Fiscal Year Ended August 31,
	2024		2023		2022
Current:
Domestic - federal	$	—	$	1	$	7
Domestic - state	5		2		2
Foreign	442		350		239
Total current	447		353		248
Deferred:
Domestic - federal	12		(2)		(25)
Domestic - state	(2)		4		—
Foreign	(94)		89		12
Total deferred	(84)		91		(13)
Total income tax expense	$	363	$	444	$	235

Reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is summarized below:

	Fiscal Year Ended August 31,
	2024		2023		2022
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	(0.3)		0.2		0.7
Impact of foreign tax rates(1)	0.1		(1.8)		(4.0)
Permanent differences	0.5		(0.5)		1.2
Income tax credits(1)	(0.7)		(0.5)		(0.5)
Valuation allowance(2)	3.5		1.1		(3.3)
Equity compensation	(0.4)		0.5		(0.5)
Impact of intercompany charges and dividends	(0.7)		2.4		3.6
Global Intangible Low-Taxed Income	1.9		0.8		1.1
Change in indefinite reinvestment assertion(3)	0.4		11.7		—
Divestiture of the Mobility Business	(5.9)		—		—
Other, net	1.3		0.3		(0.2)
Effective income tax rate	20.7	%	35.2	%	19.1	%

(1)The Company has been granted tax incentives for various subsidiaries in China, Malaysia, Singapore, Vietnam, Brazil, and Israel, which primarily expire at various dates through fiscal year 2030 and are subject to certain conditions with which the Company expects to comply. These tax incentives resulted in a tax benefit of approximately $54 million ($0.44 per basic weighted average shares outstanding), $74 million ($0.56 per basic weighted average shares outstanding) and $80 million ($0.57 per basic weighted average shares outstanding) during the fiscal years ended August 31, 2024, 2023, and 2022, respectively.

(2)For the fiscal year ended August 31, 2024, the valuation allowance change was primarily due to the change in deferred tax assets for sites with existing valuation allowances and an income tax expense of $27 million for an increase in the U.S. valuation allowance on deferred tax assets previously recognized. This impact was partially offset by a $20 million decrease in deferred tax assets with a corresponding valuation allowance due to a non-U.S. unrecognized tax benefit. For the fiscal year ended August 2022, the valuation allowance change was primarily due to an income tax benefit of $26 million for the reversal of a portion of the U.S. valuation allowance and decreased deferred tax assets with corresponding valuation allowances due to the liquidation of certain non-U.S. subsidiaries.

(3)As a result of certain operations being classified as held for sale, the Company made a change to its indefinite reinvestment assertions for the fiscal year ended August 31, 2023.

Deferred Tax Assets and Liabilities

Significant components of the deferred tax assets and liabilities are summarized below (in millions):

	August 31, 2024		August 31, 2023(1)
Deferred tax assets:
Net operating loss carryforwards	$	183	$	196
Receivables	5		4
Inventories	18		16
Compensated absences	14		16
Accrued expenses	109		116
Property, plant and equipment	2		17
Domestic tax credits	45		22
Foreign jurisdiction tax credits	9		4
Equity compensation	11		8
Domestic interest carryforwards	19		10
Capital loss carryforwards	26		19
Revenue recognition	27		29
Operating and finance lease liabilities	40		39
Other	34		24
Total deferred tax assets before valuation allowances	542		520
Less valuation allowances	(368)		(303)
Net deferred tax assets	$	174	$	217
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries	$	83	$	201
Intangible assets	29		24
Operating lease assets	81		85
Other	28		16
Total deferred tax liabilities	$	221	$	326
Net deferred tax liabilities	$	(47)	$	(109)

(1)Excludes $96 million classified as held for sale. See Note 17 – “Business Acquisitions and Divestitures” for additional information.

Based on the Company’s historical operating income, projection of future taxable income, scheduled reversal of taxable temporary differences, and tax planning strategies, management believes it is more likely than not that the Company will realize the benefit of its deferred tax assets, net of valuation allowances recorded. The Company’s assessment that led to the $27 million change in the U.S. valuation allowance on deferred tax assets previously recognized considered all available positive and negative evidence including, among other evidence, the impact of historical operating results and the impact of projected future taxable income upon application of the incremental cash tax savings approach for Global Intangible Low-Taxed Income.

As of August 31, 2024, the Company intends to indefinitely reinvest the remaining earnings from its foreign subsidiaries for which a deferred tax liability has not already been recorded. The accumulated earnings are the most significant component of the basis difference which is indefinitely reinvested. As of August 31, 2024, the indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been provided were approximately $0.8 billion. The estimated amount of the unrecognized deferred tax liability on these reinvested earnings was approximately $0.1 billion.

Tax Carryforwards

The amount and expiration dates of income tax net operating loss carryforwards, tax credit carryforwards, and tax capital loss carryforwards, which are available to reduce future taxes, if any, as of August 31, 2024, are as follows (in millions):

	Last Fiscal Year of Expiration	Amount
Income tax net operating loss carryforwards:(1)
Domestic - state	2044 or indefinite	$	56
Foreign	2039 or indefinite	$	592
Tax credit carryforwards:(1)
Domestic - federal	2044	$	41
Domestic - state	2038 or indefinite	$	4
Foreign(2)	2026	$	9
Tax capital loss carryforwards:
Domestic - federal	2029	$	100

(1)Net of unrecognized tax benefits.

(2)Calculated based on the deferral method and includes foreign investment tax credits.

Unrecognized Tax Benefits

Reconciliation of the unrecognized tax benefits is summarized below (in millions):

	Fiscal Year Ended August 31,
	2024		2023		2022
Beginning balance	$	257	$	253	$	241
Additions for tax positions of prior years	19		1		22
Reductions for tax positions of prior years	(21)		(7)		(21)
Additions for tax positions related to current year(1)	22		23		36
Divestiture of businesses	(49)		—		—
Reductions from lapses in statutes of limitations	(2)		(8)		(3)
Settlements(2)	(58)		(5)		(12)
Foreign exchange rate adjustment	—		—		(10)
Ending balance	$	168	$	257	$	253
Unrecognized tax benefits that would affect the effective tax rate (if recognized)	$	94	$	150	$	150

(1)The additions for the fiscal years ended August 31, 2024, 2023 and 2022 are primarily related to taxation of certain intercompany transactions.

(2)Settlements for the fiscal year ended August 31, 2024, primarily relates to the settlement of a U.S. audit.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company’s accrued interest and penalties were approximately $17 million and $31 million as of August 31, 2024, and 2023, respectively. The Company recognized a benefit from the net release of interest and penalties of $14 million during the fiscal year ended August 31, 2024. The Company recognized interest and penalties of approximately $3 million and $0 million during the fiscal years ended August 31, 2023, and 2022, respectively.

It is reasonably possible that the August 31, 2024, unrecognized tax benefits could decrease during the next 12 months by $50 million, primarily related to lapses in statutes of limitations associated with intercompany transactions.

The Company is no longer subject to U.S. federal tax examinations for fiscal years before August 31, 2021. In major non-U.S. and state jurisdictions, the Company is no longer subject to income tax examinations for fiscal years before August 31, 2014, and August 31, 2009, respectively.