Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

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Income Taxes
6 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
The effective tax rates for the three months ended March 31, 2021 and 2020 were 27.8% and (2.6)%, respectively. The difference in the effective tax rate in the three months ended March 31, 2021, relative to the federal statutory tax rate of 21%, was primarily attributable to an unfavorable geographic mix of pretax income. Additionally, the increase in the effective tax rate in the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was driven by the impact that the tax gain on the divestiture of ABEL and the utilization of tax loss carryforwards had on foreign tax credit determinations related to foreign income inclusions, the recognition of deferred taxes on accumulated earnings of foreign subsidiaries, and the discrete recognition of the tax effect of functional currency fluctuations. The negative effective tax rate in the three months ended March 31, 2020 was due to the net loss position and the discrete recognition of tax expense on the divestiture of Cimcool, which was partially offset by the tax benefit recognized from the revaluation of current and deferred tax balances in connection with the enacted statutory tax rate reductions in certain foreign jurisdictions.

The effective tax rates for the six months ended March 31, 2021 and 2020 were 28.3% and 12.7%, respectively. The difference in the effective tax rate in the six months ended March 31, 2021 relative to the federal statutory tax rate of 21%, was primarily attributable to an unfavorable geographic mix of pretax income. Additionally, the increase in the effective tax rate in the six months ended March 31, 2021, compared to the six months ended March 31, 2020, was driven by the impact that the tax loss on the divestiture of Red Valve, the tax gain on the divestiture of Abel, and the utilization of tax loss carryforwards had on foreign tax credit determinations related to foreign income inclusions. The effective tax rate was negatively impacted by the recognition of deferred taxes on accumulated earnings of foreign subsidiaries, and the discrete recognition of the tax effect of functional currency fluctuations. The negative effective tax rate in the six months ended March 31, 2020 was due to the net loss position and the discrete recognition of tax expense on the divestiture of Cimcool which was partially offset by the tax benefit recognized from the revaluation of current and deferred tax balances in connection with the enacted statutory tax rate reductions in certain foreign jurisdictions.
The acquisition of Milacron was completed during the quarter ended December 31, 2019, through the merger of a wholly-owned Hillenbrand subsidiary with and into Milacron, resulting in 100% ownership of Milacron common stock that was issued and outstanding after the acquisition. In connection with the acquisition, the Company recorded a deferred tax asset of $5.9 and a deferred tax liability of $139.0 associated with the difference between the financial accounting basis and the tax basis in the acquired assets and liabilities assumed. Included in the acquired deferred taxes were deferred tax assets for the carryforward of Milacron’s tax net operating losses from federal, state, and foreign tax jurisdictions of $65.5, which were partially offset by the recognition of preliminary valuation allowances of $22.0 related to the estimated realizability of these items. The utilization of the acquired U.S. federal and state net operating losses to reduce Hillenbrand’s taxable income will be limited annually under Section 382 of the Internal Revenue Code. The annual Section 382 limitation is $39.6 until the net operating losses are utilized.