Johnson Controls 2015 Annual Report Download - page 102

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18. INCOME TAXES
At March 31, 2015, the Company determined that its GWS segment met the criteria to be classified as a discontinued operation,
which required retrospective application to financial information for all periods presented. Refer to Note 3, "Discontinued
Operations," of the notes to consolidated financial statements for further information regarding the Company's discontinued
operations.
The more significant components of the Company’s income tax provision from continuing operations are as follows (in millions):
Year Ended September 30,
2015 2014 2013
Tax expense at federal statutory rate $ 753 $ 671 $ 619
State income taxes, net of federal benefit (23) 7 39
Foreign income tax expense at different rates and foreign losses
without tax benefits (198)(196)(299)
U.S. tax on foreign income (203)(222)(56)
Reserve and valuation allowance adjustments (99) 34 197
U.S. credits and incentives (12)(9)(28)
Business divestitures 354 71 8
Restructuring and impairment costs 52 75 238
Other (24)(24)(44)
Income tax provision $ 600 $ 407 $ 674
The effective rate is below the U.S. statutory rate for fiscal 2015 primarily due to the benefits of continuing global tax planning
initiatives, income in certain non-U.S. jurisdictions with a tax rate lower than the U.S. statutory tax rate and adjustments due to
tax audit resolutions, partially offset by the tax consequences of business divestitures, and significant restructuring and impairment
costs. The effective rate is below the U.S. statutory rate for fiscal 2014 primarily due to the benefits of continuing global tax
planning initiatives and income in certain non-U.S. jurisdictions with a tax rate lower than the U.S. statutory tax rate partially
offset by the tax consequences of business divestitures, significant restructuring and impairment costs, and valuation allowance
adjustments. The effective rate is above the U.S. statutory rate for fiscal 2013 primarily due to the tax consequences of significant
restructuring and impairment costs, and valuation allowance and uncertain tax position adjustments, partially offset by favorable
tax audit resolutions, the benefits of continuing global tax planning initiatives and income in certain non-U.S. jurisdictions with
a tax rate lower than the U.S. statutory tax rate.
Valuation Allowances
The Company reviews the realizability of its deferred tax asset 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 the fourth quarter of fiscal 2015, the Company performed an analysis related to the realizability of its worldwide deferred tax
assets. As a result, and after considering tax planning initiatives and other positive and negative evidence, the Company determined
that it was more likely than not that certain deferred tax assets primarily within Spain, Germany, and the United Kingdom would
not be realized, and it is more likely than not that certain deferred tax assets of Poland and Germany will be realized. The impact
of the net valuation allowance provision offset the benefit of valuation allowance releases and, as such, there was no net impact
to income tax expense in the three month period ended September 30, 2015.
In the fourth quarter of fiscal 2014, the Company performed an analysis related to the realizability of its worldwide deferred tax
assets. As a result, and after considering tax planning initiatives and other positive and negative evidence, the Company determined
that it was more likely than not that deferred tax assets within Italy would not be realized. Therefore, the Company recorded $34
million of net valuation allowances as income tax expense in the three month period ended September 30, 2014.