Johnson Controls International plcJCI
Johnson Controls International plc Income Taxes Disclosure
INCOME TAXES
The components of the Company’s income tax provision from continuing operations are as follows (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
Tax expense at Ireland statutory rate of 12.5% | $ | 246 | $ | 190 | $ | 139 | |||||||||||
| U.S. state income tax, net of federal benefit | 60 | 42 | 30 | ||||||||||||||
Income subject to the U.S. federal tax rate | 117 | 63 | 42 | ||||||||||||||
| Income subject to rates different than the statutory rate | (181) | (204) | 44 | ||||||||||||||
| Reserve and valuation allowance adjustments | 14 | (139) | (559) | ||||||||||||||
| Intellectual property transactions and adjustments | — | — | (176) | ||||||||||||||
| Impact of acquisitions and divestitures | — | 121 | — | ||||||||||||||
| Restructuring and impairment costs | (11) | 38 | 12 | ||||||||||||||
| Income tax provision (benefit) | $ | 245 | $ | 111 | $ | (468) | |||||||||||
| Effective tax rate | 12 | % | 7 | % | (42) | % | |||||||||||
For fiscal 2025, the effective tax rate for continuing operations was 12% and was lower than the statutory tax rate primarily due to the favorable impact of impairment and restructuring charges and the benefits of continuing global tax planning initiatives, partially offset by the unfavorable impact of tax audit resolutions.
For fiscal 2024, the effective tax rate for continuing operations was 7% and was lower than the statutory tax rate primarily due to tax reserve adjustments as the result of tax audit resolutions and expired statute of limitations for certain tax years, valuation allowance adjustments and the benefits of continuing global tax planning initiatives, partially offset by the establishment of a deferred tax liability on the outside basis difference of the Company’s investment in certain subsidiaries as a result of the planned divestiture of its R&LC HVAC business and the unfavorable impact of impairment and restructuring charges.
For fiscal 2023, the effective tax rate for continuing operations was (42)% and was lower than the statutory tax rate primarily due to the favorable tax impacts of intellectual property tax adjustments, tax reserve adjustments as the result of tax audit resolutions and remeasurements, valuation allowance adjustments and the benefits of continuing global tax planning initiatives, partially offset by the unfavorable impact of impairment and restructuring charges.
Valuation Allowances
The Company reviews the realizability of its deferred tax assets and related valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset are considered, along with any other positive or negative evidence. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.
In fiscal 2024, due to changes in forecasted taxable income, the Company determined that it was more likely than not that certain deferred tax assets of Mexico and Germany would be realized. The valuation allowance adjustment resulted in a tax benefit of $48 million.
In fiscal 2023, due to changes in forecasted taxable income, the Company determined that it was more likely than not that certain deferred tax assets of Canada, Mexico, and Spain would be realized. The valuation allowance adjustment resulted in a tax benefit of $121 million.
The following table summarizes changes in the valuation allowance (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of period | $ | 6,258 | $ | 6,279 | $ | 5,906 | |||||||||||
| Allowance provision for new operating and other loss carryforwards | 134 | 215 | 544 | ||||||||||||||
| Allowance reductions | (136) | (236) | (171) | ||||||||||||||
| Balance at end of period | $ | 6,256 | $ | 6,258 | $ | 6,279 | |||||||||||
Uncertain Tax Positions
The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Judgment is required in determining the worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by tax authorities.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance, October 1 | $ | 2,053 | $ | 2,158 | $ | 2,485 | |||||||||||
| Additions for tax positions related to the current year | 62 | 39 | 59 | ||||||||||||||
| Additions for tax positions of prior years | 21 | 53 | 89 | ||||||||||||||
| Reductions for tax positions of prior years | (62) | (35) | (23) | ||||||||||||||
| Settlements with taxing authorities | (65) | (35) | (6) | ||||||||||||||
| Statute closings and audit resolutions | (82) | (127) | (446) | ||||||||||||||
| Ending balance, September 30 | $ | 1,927 | $ | 2,053 | $ | 2,158 | |||||||||||
The following table summarizes tax effected unrecognized tax benefits that, if recognized, would impact the effective tax rate and the related accrued interest, net of tax benefit (in millions):
| September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Tax effected unrecognized tax benefits that, if recognized, would affect the effective tax rate | $ | 1,427 | $ | 1,466 | $ | 1,533 | |||||||||||
| Net accrued interest | 459 | 398 | 329 | ||||||||||||||
In the U.S., fiscal years 2019 through 2020 are currently under audit and fiscal years 2017 through 2018 are currently under appeal with the Internal Revenue Service (“IRS”) for certain legal entities. Additionally, the Company is currently under exam in the following major non-U.S. jurisdictions for continuing operations:
| Tax Jurisdiction | Tax Years Covered | |||||||
| Belgium | 2016 - 2017; 2019-2020 | |||||||
| Germany | 2007 - 2021 | |||||||
| Mexico | 2016; 2018 - 2019 | |||||||
| United Kingdom | 2014 - 2015; 2018; 2020 - 2021 | |||||||
It is reasonably possible that certain tax examinations and/or tax litigation will conclude within the next twelve months, which could have a material impact on tax expense. Based upon the circumstances surrounding these examinations, the impact is not currently quantifiable.
Other Tax Matters
During fiscal 2025, 2024 and 2023, the Company incurred charges for restructuring and impairment costs of $546 million, $510 million and $1,049 million, which generated tax benefits of $80 million, $26 million and $120 million, respectively.
Impacts of Tax Legislation and Change in Statutory Tax Rates
On July 4, 2025, the One Big Beautiful Bill Act (“OBBB”) was signed into law by the president of the United States. It includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both U.S. and non-U.S.), and expanding certain Inflation Reduction Act incentives while accelerating the phase-out of others. The impact on tax expense in the 2025 fiscal year is not material and the Company does not anticipate the OBBB to have a material impact on tax expense in subsequent years.
On December 18, 2023, the president of Ireland signed into law the Finance (No. 2) Bill 2023, which included legislation regarding the implementation of the Pillar Two global minimum tax. The Pillar Two legislation went into effect for the Company’s 2025 fiscal year. The impact on tax expense in the 2025 fiscal year is not material.
On September 11, 2023, the Schaffhausen parliament approved a partial revision of the cantonal act on direct taxation: Immediate Minimum Taxation Measure (“IMTM”). On November 19, 2023, IMTM was approved in a public referendum in the canton of Schaffhausen, was published in the cantonal official gazette on December 8, 2023, and was effective starting January 1, 2024. The IMTM increased Switzerland's combined statutory income tax rate to approximately 15%. As a result, in fiscal 2024, the Company recorded a noncash discrete net tax benefit of $80 million due to the remeasurement of deferred tax assets and liabilities related to Switzerland and the canton of Schaffhausen.
During fiscal 2025, 2024 and 2023, other tax legislation was adopted in various jurisdictions. These law changes did not have a material impact on the Company's consolidated financial statements.
Selected Income Tax Data
Selected income tax data related to continuing operations were as follows (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| Components of income (loss) from continuing operations before income taxes: | |||||||||||||||||
| U.S. | $ | (309) | $ | (406) | $ | (325) | |||||||||||
| Non-U.S. | 2,278 | 1,928 | 1,438 | ||||||||||||||
| Income from continuing operations before income taxes | $ | 1,969 | $ | 1,522 | $ | 1,113 | |||||||||||
| Components of the provision (benefit) for income taxes: | |||||||||||||||||
| Current | |||||||||||||||||
| U.S. federal | $ | (239) | $ | 330 | $ | (201) | |||||||||||
| U.S. state | (12) | 86 | 94 | ||||||||||||||
| Non-U.S. | 302 | 102 | 289 | ||||||||||||||
| 51 | 518 | 182 | |||||||||||||||
| Deferred | |||||||||||||||||
| U.S. federal | 385 | (299) | (267) | ||||||||||||||
| U.S. state | 79 | (26) | (25) | ||||||||||||||
| Non-U.S. | (270) | (82) | (358) | ||||||||||||||
| 194 | (407) | (650) | |||||||||||||||
| Income tax provision (benefit) | $ | 245 | $ | 111 | $ | (468) | |||||||||||
Income taxes paid (1) | $ | 606 | $ | 704 | $ | 294 | |||||||||||
(1) The Company also paid $1.4 billion of taxes related to the operation and disposition of the Residential & Light Commercial HVAC Business, which is reported through Discontinued Operations.
At September 30, 2025 and 2024, the Company recorded within the consolidated statements of financial position in other current assets approximately $562 million and $100 million, respectively, of income tax assets. At September 30, 2025 and 2024, the Company recorded within the consolidated statements of financial position in other current liabilities approximately $176 million and $211 million, respectively, of accrued income tax liabilities.
At September 30, 2025, the Company has not provided U.S. or non-U.S. income taxes on approximately $22.7 billion of outside basis differences of consolidated subsidiaries of Johnson Controls International plc. The Company is indefinitely reinvested in these basis differences. The reduction of the outside basis differences via the sale or liquidation of these subsidiaries and/or distributions could create taxable income. The Company's intent is to reduce the outside basis differences only when it would be tax efficient. Given the numerous ways in which the basis differences may be reduced, it is not practicable to estimate the amount of unrecognized withholding taxes and deferred tax liability on the outside basis differences.
Deferred taxes were classified in the consolidated statements of financial position as follows (in millions):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Other noncurrent assets | $ | 1,777 | $ | 1,969 | |||||||
| Other noncurrent liabilities | (185) | (301) | |||||||||
| Net deferred tax asset | $ | 1,592 | $ | 1,668 | |||||||
Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities included (in millions):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Accrued expenses and reserves | $ | 424 | $ | 661 | |||||||
| Employee and retiree benefits | 38 | 43 | |||||||||
| Property, plant and equipment | 522 | 729 | |||||||||
| Net operating loss and other credit carryforwards | 6,963 | 6,628 | |||||||||
| Research and development | 233 | 219 | |||||||||
| Intangible assets | 137 | 306 | |||||||||
| Operating lease liabilities | 327 | 294 | |||||||||
| Other, net | 315 | 455 | |||||||||
| 8,959 | 9,335 | ||||||||||
| Valuation allowances | (6,256) | (6,258) | |||||||||
| 2,703 | 3,077 | ||||||||||
| Deferred tax liabilities | |||||||||||
| Subsidiaries, joint ventures and partnerships | 193 | 440 | |||||||||
| Operating lease right-of-use assets | 327 | 294 | |||||||||
| Other liabilities | 591 | 675 | |||||||||
| 1,111 | 1,409 | ||||||||||
| Net deferred tax asset | $ | 1,592 | $ | 1,668 | |||||||
At September 30, 2025, the Company had available net operating loss carryforwards of approximately $26.1 billion, of which $15.7 billion will expire at various dates between 2026 and 2045, and the remainder has an indefinite carryforward period. The Company had available U.S. foreign tax credit carryforwards at September 30, 2025 of $35 million which will expire in 2029. The valuation allowance, generally, is for loss and credit carryforwards for which realization is uncertain because it is unlikely that the losses and/or credits will be realized given the lack of sustained profitability and/or limited carryforward periods in certain countries.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 14, 2025 | Showing above |
| 2024 | Nov 19, 2024 | |
| 2023 | Dec 14, 2023 | |
| 2022 | Nov 15, 2022 | |
| 2021 | Nov 15, 2021 | |
| 2020 | Nov 16, 2020 | |
| 2019 | Nov 21, 2019 | |
| 2018 | Nov 20, 2018 | |
| 2017 | Nov 21, 2017 | |
| 2016 | Nov 23, 2016 | |
| 2015 | Nov 13, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.