Johnson Controls 2014 Annual Report Download - page 31

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31
Other Tax Matters
During fiscal 2014 and 2013, the Company incurred significant charges for restructuring and impairment costs. Refer to Note 16,
"Significant Restructuring and Impairment Costs," of the notes to consolidated financial statements for additional information. A
substantial portion of these charges cannot be benefited for tax purposes due to our current tax position in these jurisdictions and
the underlying tax basis in the impaired assets, thus causing $75 million and $229 million incremental tax expense in fiscal 2014
and 2013, respectively.
During the fourth quarter of fiscal 2014, the Company recorded a discrete tax benefit of $51 million due to change in entity status.
In the fourth quarter of fiscal 2014, the Company provided income tax expense on the foreign undistributed earnings of the non-
U.S. subsidiaries related to the Global Workplace Solutions business, which resulted in $35 million of tax expense.
In the third quarter of fiscal 2014, the Company disposed of its Automotive Experience Interiors headliner and sun visor product
lines. Refer to Note 2, "Acquisitions and Divestitures," of the notes to consolidated financial statements for additional information.
As a result, the Company recorded a pre-tax loss on divestiture of $95 million and income tax expense of $38 million. The income
tax expense is due to the jurisdictional mix of gains and losses on the sale, which resulted in non-benefited losses in certain countries
and taxable gains in other countries.
In the third quarter of fiscal 2013, the Company resolved certain Mexican tax issues, which resulted in a $61 million benefit to
income tax expense.
Impacts of Tax Legislation and Change in Statutory Tax Rates
The "look-through rule," under subpart F of the U.S. Internal Revenue Code, expired for the Company on September 30, 2014.
The "look-through rule" had provided an exception to the U.S. taxation of certain income generated by foreign subsidiaries. It is
generally thought that this rule will be extended with the possibility of retroactive application. The "look-through rule" previously
expired for the Company on September 30, 2012 but was extended in January 2013 retroactive to the beginning of the Company's
2013 fiscal year.
As a result of changes to Mexican tax law in the first quarter of fiscal 2014, the Company recorded a benefit to income tax expense
of $25 million. Tax legislation was also adopted in various other jurisdictions during the fiscal year ended September 30, 2014.
These law changes did not have a material impact on the Company's consolidated financial statements.
As a result of foreign law changes during the second quarter of fiscal 2013, the Company increased its total reserve for uncertain
tax positions, resulting in income tax expense of $17 million.
Income (Loss) From Discontinued Operations, Net of Tax
Year Ended
September 30,
(in millions) 2014 2013 Change
Income (loss) from discontinued operations,
net of tax $ (218) $ 101 *
* Measure not meaningful
The change in income (loss) from discontinued operations, net of tax, was primarily due to a prior year gain, net of tax, of $257
million related to the sale of the Automotive Experience Electronics' HomeLink® product line, a fiscal 2014 discrete non-cash
tax charge of $180 million related to the repatriation of foreign cash associated with the divestiture of the Electronics business and
$80 million of divestiture related losses recorded in fiscal 2014, partially offset by a fiscal 2013 tax charge of $210 million related
to foreign undistributed earnings of the non-U.S. subsidiaries related to the Electronics business.
Refer to Note 3, "Discontinued Operations," of the notes to consolidated financial statements for further information regarding
the Company's discontinued operations.