Income Taxes (Tables)

12 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Schedule of (Loss) Income Before Income Tax (Benefit) Expense Attributable to Jurisdictions

Income (loss) before income tax (benefit) expense was attributable to the following jurisdictions:

	For the fiscal years ended June 30,
	2016			2015		2014(a)
	(in millions)
U.S.	$	(125	)	$	148	$	(602	)
Foreign		306			404		424
Income (loss) before income tax (benefit) expense	$	181		$	552	$	(178	)

^(a)  See Discussion of Foreign Tax Refund below.

Schedule of Components of Income Tax (Benefit) Expense

The significant components of the Company’s income tax (benefit) expense were as follows:

	For the fiscal years ended June 30,
	2016			2015			2014(a)
	(in millions)
Current:
U.S.
Federal	$	15		$	35		$	86
State & local		5			11			(19	)
Foreign		102			135			(734	)
Total current tax		122			181			(667	)
Deferred:
U.S.
Federal		(71	)		16			19
State & local		(106	)		1			12
Foreign		1			(13	)		22
Total deferred tax		(176	)		4			53
Total income tax (benefit) expense	$	(54	)(b)	$	185		$	(614	)

^(a)  See Discussion of Foreign Tax Refund below.

^(b)  The Company recognized a tax benefit of approximately $144 million upon reclassification of the Digital Education segment to discontinued operations in Income (loss) from discontinued operations, net of tax, in the Statements of Operations in fiscal 2016. In addition, a tax benefit of $30 million related to the current year operations of the Digital Education segment was recorded to discontinued operations in Income (loss) from discontinued operations, net of tax, in the Statements of Operations in fiscal 2016. The tax (benefit) expense shown above excludes the tax benefit of the Company’s digital education business. The Company will not have a current federal tax expense after accounting for the current federal tax benefits attributed to discontinued operations.

Net Impact of Tax Refund and Interest, Net of Tax, Recorded in Statement of Operations

Refer to the table below for the net impact of the tax refund and interest, net of tax, recorded in the Statements of Operations:

	For the fiscal year ended June 30, 2014
	(in millions)
Other, net	$	(721	)
Income tax benefit (expense)		721
Net impact to the Statement of Operations	$	—

Effective Income Tax Rate Reconciliation

The reconciliation between the Company’s actual effective tax rate and the statutory U.S. Federal income tax rate of 35% was:

	For the fiscal years ended June 30,
	2016			2015			2014
U.S. Federal income tax rate		35	%		35	%		35	%
State and local taxes, net		(8	)		1			3
Effect of foreign operations(a)		(1	)		(2	)		38
Foreign tax refund received(b)		—			—			405
Foreign tax refund paid to 21st Century Fox(b)		—			—			(142	)
Change in valuation allowance(c)		(62	)		—			—
Non-deductible compensation and benefits		3			1			—
R&D credits		(2	)		(1	)		2
Other, net		5			—			4
Effective tax rate(d)		(30	)%		34	%		345	%

^(a)  The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”) which have lower income tax rates than the U.S. For the fiscal years ended June 30, 2016 and June 30, 2015, the effect of foreign operations at lower tax rates decreased the Company’s effective tax rate 1% and 2%, respectively, as the Company recorded pre-tax book income on a consolidated basis. For the year ended June 30, 2014, the effect of foreign operations at lower tax rates increased the Company’s effective tax rate 38% as the Company recorded pre-tax book loss on a consolidated basis.

^(b)  The Company recorded a tax benefit, net of applicable taxes on interest, of $721 million for the fiscal year ended June 30, 2014 to Income tax benefit (expense) in the Statements of Operations related to certain foreign tax refunds received. See the discussion of Foreign Tax Refund above. The tax benefit related to these refunds increased our effective tax rate 405%. These foreign tax refunds received were paid to 21st Century Fox, net of applicable taxes on interest, in accordance with the terms of the Tax Sharing and Indemnification Agreement. Accordingly, for the fiscal year ended June 30, 2014, the Company recorded an expense to Other, net of approximately $721 million for the payment to 21st Century Fox in the Statements of Operations. This expense is a non-deductible item the tax effect of which is approximately $252 million and reflected as a decrease of approximately 142% in our effective tax rate.

^(c)  Included in the change in valuation allowance is a tax benefit of $106 million related to the release of previously established valuation allowances related to certain U.S. Federal net operating losses and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business during fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration. Total tax benefits related to the release of valuation allowances decreased our effective tax rate by 62%.

^(d)  For the fiscal year ended June 30, 2016, the effective tax rate of (30%) represents income tax benefit when compared to consolidated pre-tax book income. For the fiscal year ended June 30, 2015, the effective tax rate of 34% represents an income tax expense when compared to consolidated pre-tax book income. For the fiscal year ended June 30, 2014, the effective tax rate of 345% represents an income tax benefit when compared to consolidated pre-tax book loss. As a result, certain reconciling items between the U.S. federal income tax rate and the Company’s effective tax rate may have the opposite impact.

Summary of Recognized Current and Deferred Income Taxes in Balance Sheets

The Company recognized current and deferred income taxes in the Balance Sheets at June 30, 2016 and 2015, respectively:

	As of June 30,
	2016			2015(a)
	(in millions)
Other current assets	$	—		$	63
Deferred income tax assets		602			219
Other current liabilities		—			(1	)
Deferred income tax liabilities		(171	)		(166	)
Net deferred tax assets	$	431		$	115

^(a)  In fiscal 2016, the Company early-adopted ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which requires that deferred income tax liabilities and assets be classified as non-current in the Consolidated Balance Sheet. As such, the requirement under prior guidance which required an entity to separate deferred tax liabilities and assets into a current and non-current amount in the Consolidated Balance Sheet has been eliminated. The prior periods have not been retroactively adjusted as a result of the adoption of ASU 2015-17.

Schedule of Components of Deferred Tax Assets and Liabilities

The significant components of the Company’s deferred tax assets and liabilities were as follows:

	As of June 30,
	2016			2015
	(in millions)
Deferred tax assets:
Accrued liabilities	$	185		$	56
Capital loss carryforwards		803			892
Retirement benefit obligations		112			85
Net operating loss carryforwards		580			540
Business credits		38			46
Other		234			310
Total deferred tax assets		1,952			1,929
Deferred tax liabilities:
Asset basis difference and amortization		(442	)		(465	)
Other		(65	)		(41	)
Total deferred tax liabilities		(507	)		(506	)
Net deferred tax asset before valuation allowance		1,445			1,423
Less: valuation allowance (See Note 21 - Valuation and Qualifying Accounts)		(1,014	)		(1,308	)
Net deferred tax liabilities	$	431		$	115

Schedule of Income Tax Net Operating Loss Carryforwards (NOLs) (Gross, Net Uncertain Tax Benefits)

As of June 30, 2016, the Company had income tax Net Operating Loss Carryforwards (NOLs) (gross, net of uncertain tax benefits), in various jurisdictions as follows:

Jurisdiction	Expiration	Amount (in  millions)
U.S. Federal	2021 to 2036	$	858
U.S. States	Various		581
Australia	Indefinite		452
U.K.	Indefinite		134
Other Foreign	Various		346

Change in Unrecognized Tax Benefits, Excluding Interest and Penalties

The following table sets forth the change in the Company’s unrecognized tax benefits, excluding interest and penalties:

	For the fiscal years ended June 30,
	2016			2015			2014
	(in millions)
Balance, beginning of period	$	129		$	58		$	127
Additions for prior year tax positions		6			79			39
Additions for current year tax positions		4			4			5
Reduction for prior year tax positions		(40	)		(7	)		(114	)
Lapse of the statute of limitations		(2	)		—			—
Cash settlements		(2	)		—			—
Impact of currency translations		(9	)		(5	)		1
Balance, end of period	$	86		$	129		$	58

Summary of Major Tax Jurisdictions and Fiscal Years Open to Examination

The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that could be audited by the respective taxing authorities.

Jurisdiction	Fiscal Years Open to Examination
U.S. Federal	2009-2015
U.S. States	Various
Australia	2010-2015
U.K.	2011-2015