ROCKWELL AUTOMATION, INCROK
ROCKWELL AUTOMATION, INC Income Taxes Disclosure
Income Taxes
Selected income tax data (in millions):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Components of Income before income taxes | ||||||||||||||||||||
| United States | $ | 280 | $ | 389 | $ | 794 | ||||||||||||||
| Non-United States | 637 | 711 | 814 | |||||||||||||||||
| Total | $ | 917 | $ | 1,100 | $ | 1,608 | ||||||||||||||
| Components of Income tax provision | ||||||||||||||||||||
| Current | ||||||||||||||||||||
| United States | $ | 97 | $ | 78 | $ | 221 | ||||||||||||||
| Non-United States | 169 | 128 | 160 | |||||||||||||||||
| State and local | 16 | 14 | 49 | |||||||||||||||||
| Total current | 282 | 220 | 430 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| United States | (87) | (42) | (85) | |||||||||||||||||
| Non-United States | (11) | (12) | 6 | |||||||||||||||||
| State and local | (16) | (14) | (21) | |||||||||||||||||
| Total deferred | (114) | (68) | (100) | |||||||||||||||||
| Income tax provision | $ | 168 | $ | 152 | $ | 330 | ||||||||||||||
| Total income taxes paid | $ | 356 | $ | 479 | $ | 345 | ||||||||||||||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant tax related provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017 (Tax Act), modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates with the earliest provisions taking effect in fiscal 2025 and others beginning in fiscal 2026 and beyond. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. We have reflected the impact in our deferred balances for the year ended September 30, 2025, and will monitor future effects as new guidance emerges.
Our final payment of $97 million related to the U.S. transition tax under the Tax Act will be paid in the second quarter of 2026 and is classified in Other current liabilities in the Consolidated Balance Sheet as of September 30, 2025. This amount was classified in Other liabilities in the Consolidated Balance Sheet as of September 30, 2024. Furthermore, taxes paid as a result of the transition tax was $78 million during the year ended September 30, 2025, $58 million during the year ended September 30, 2024, and $31 million during the year ended September 30, 2023, as included in total income taxes paid.
Effective Tax Rate Reconciliation
The reconciliation between the U.S. federal statutory rate and our effective tax rate was:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Statutory tax rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||||||||
| State and local income taxes | (0.1) | 0.2 | 1.5 | |||||||||||||||||
| Non-United States taxes | (3.8) | (4.2) | (4.7) | |||||||||||||||||
| Repatriation of foreign earnings | 1.0 | 0.9 | 0.9 | |||||||||||||||||
| Foreign-derived intangible income | (1.5) | (0.7) | (0.6) | |||||||||||||||||
| Settlements with taxing authorities and tax refund claims | 0.6 | (1.2) | 0.3 | |||||||||||||||||
Change in valuation allowance (1) | 3.6 | 0.5 | 4.1 | |||||||||||||||||
| Share-based compensation | (1.1) | (0.2) | (0.6) | |||||||||||||||||
| Research and development tax credit | (2.9) | (2.0) | (1.3) | |||||||||||||||||
| Other | 1.5 | (0.5) | (0.1) | |||||||||||||||||
| Effective income tax rate | 18.3 | % | 13.8 | % | 20.5 | % | ||||||||||||||
(1) During fiscal year 2025 and 2023, the effective tax rate increased by 3.6% and 4.1%, respectively, resulting from a valuation allowance recorded on certain deferred tax assets of the Sensia joint venture and tax effects of the related impairment.
We operate in certain non-U.S. tax jurisdictions under government-sponsored tax incentive programs. The tax benefit attributable to these programs was $45 million ($0.40 per diluted share) in 2025, $36 million ($0.31 per diluted share) in 2024, and $62 million ($0.54 per diluted share) in 2023.
Deferred Taxes
The tax effects of temporary differences that give rise to our net deferred income tax assets (liabilities) consists of (in millions):
| 2025 | 2024 | |||||||||||||
| Deferred income tax assets | ||||||||||||||
| Compensation and benefits | $ | 31 | $ | 18 | ||||||||||
| Inventory | 24 | 23 | ||||||||||||
| Returns, rebates, and incentives | 61 | 62 | ||||||||||||
| Retirement benefits | 45 | 88 | ||||||||||||
| Environmental remediation and other site-related costs | 25 | 24 | ||||||||||||
| Share-based compensation | 23 | 26 | ||||||||||||
| Other accruals and reserves | 470 | 386 | ||||||||||||
| Net operating loss carryforwards | 62 | 70 | ||||||||||||
| Tax credit carryforwards | 13 | 14 | ||||||||||||
| Capital loss carryforwards | 16 | 15 | ||||||||||||
| Other | 125 | 58 | ||||||||||||
| Subtotal | 895 | 784 | ||||||||||||
| Valuation allowance | (129) | (98) | ||||||||||||
| Net deferred income tax assets | 766 | 686 | ||||||||||||
| Deferred income tax liabilities | ||||||||||||||
| Property | (60) | (52) | ||||||||||||
| Intangible assets | (105) | (120) | ||||||||||||
| Investments | — | — | ||||||||||||
| Unremitted earnings of foreign subsidiaries | (45) | (37) | ||||||||||||
| Other | — | — | ||||||||||||
| Deferred income tax liabilities | (210) | (209) | ||||||||||||
| Total net deferred income tax assets | $ | 556 | $ | 477 | ||||||||||
We provide for deferred taxes on the majority of earnings of our non-U.S. subsidiaries and have done so since the enactment of the Tax Act in 2017. We do not provide for deferred taxes on a limited number of our non-U.S. subsidiaries established in jurisdictions that apply significant restrictions for repatriating cash. The amount of cumulative non-distributed earnings considered to be indefinitely reinvested outside the U.S. at September 30, 2025, is $156 million. It is not practicable to estimate the amount of additional taxes that may be payable upon distribution of these earnings.
We believe it is more likely than not that we will realize our deferred tax assets through the reduction of future taxable income, other than for the deferred tax assets reflected below.
Tax attributes and related valuation allowances at September 30, 2025 consists of (in millions):
| Tax attributes and related valuation allowances | Tax Benefit Amount | Valuation Allowance | Carryforward Period Ends | |||||||||||||||||||||||
| Non-United States net operating loss carryforward | $ | 5 | $ | — | 2026 | - | 9/30/2044 | |||||||||||||||||||
| Non-United States net operating loss carryforward | 52 | 52 | Indefinite | |||||||||||||||||||||||
| Non-United States capital loss carryforward | 16 | 16 | Indefinite | |||||||||||||||||||||||
| State and local net operating loss carryforward | 5 | 1 | 2026 | - | 2045 | |||||||||||||||||||||
| State tax credit carryforward | 13 | — | 2033 | - | 2040 | |||||||||||||||||||||
| Subtotal | 91 | 69 | ||||||||||||||||||||||||
| Other deferred tax assets | 60 | 60 | Indefinite | |||||||||||||||||||||||
| Total | $ | 151 | $ | 129 | ||||||||||||||||||||||
Unrecognized Tax Benefits
A reconciliation of our gross unrecognized tax benefits, excluding interest and penalties, is as follows (in millions):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Gross unrecognized tax benefits balance at beginning of year | $ | 25 | $ | 10 | $ | 4 | ||||||||||||||
| Additions based on tax positions related to the current year | 5 | 5 | 4 | |||||||||||||||||
| Additions based on tax positions related to prior years | 2 | 10 | 3 | |||||||||||||||||
| Reductions related to settlements with taxing authorities | (1) | — | (1) | |||||||||||||||||
| Reductions related to lapses of statute of limitations | (2) | — | — | |||||||||||||||||
| Gross unrecognized tax benefits balance at end of year | $ | 29 | $ | 25 | $ | 10 | ||||||||||||||
The amount of gross unrecognized tax benefits that would reduce our effective tax rate if recognized was $29 million, $25 million, and $10 million at September 30, 2025, 2024, and 2023, respectively.
Accrued interest and penalties related to unrecognized tax benefits were $2 million, $2 million, and $1 million at September 30, 2025, 2024, and 2023, respectively. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision. (Expenses) benefits recognized in 2025, 2024, and 2023, were $0 million, ($1) million, and $0 million, respectively.
We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $24 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations. If all of the unrecognized tax benefits were recognized, the net reduction to our income tax provision, including the recognition of interest and penalties and offsetting tax assets, could be up to $25 million.
We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal income tax examinations for years before 2018, U.S. state and local income tax examinations for years before 2014, and non-U.S. income tax examinations for years before 2008.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 12, 2025 | Showing above |
| 2024 | Nov 12, 2024 | |
| 2023 | Nov 8, 2023 | |
| 2022 | Nov 8, 2022 | |
| 2021 | Nov 9, 2021 | |
| 2020 | Nov 10, 2020 | |
| 2019 | Nov 12, 2019 | |
| 2018 | Nov 9, 2018 | |
| 2017 | Nov 15, 2017 | |
| 2016 | Nov 15, 2016 | |
| 2015 | Nov 17, 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.