Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.


	For the fiscal years ended June 30,
	2020		2019		2018
	(in millions)
Current:
U.S.
Federal	$	(4)	$	5	$	4
State & Local	3		2		8
Foreign	102		118		107
Total current tax	101		125		119
Deferred:
U.S.
Federal	(45)		26		269
State & Local	(4)		5		(9)
Foreign	(31)		(30)		(24)
Total deferred tax	(80)		1		236
Total income tax expense	$	21	$	126	$	355


	For the fiscal years ended June 30,
	2020		2019		2018
U.S. federal income tax rate ^(a)	21	%	21	%	28	%
State and local taxes, net	1		2		(1)
Effect of foreign operations ^(b)	(2)		9		(2)
Change in valuation allowance	—		—		1
Non-deductible goodwill and asset impairments ^(c)	(22)		5		(32)
Impact of the Tax Act ^(d)	—		—		(22)
Write-off of channel distribution agreement ^(e)	—		—		(9)
Income tax audit settlements ^(f)	—		—		5
Non-deductible compensation and benefits	—		1		(1)
R&D credits	1		(2)		—
Other, net	—		—		—
Effective tax rate ^(g)	(1)	%	36	%	(33)	%

(a)As the Company has a June 30 fiscal year-end, the impact of the lower tax rate from the Tax Act was phased in resulting in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ended June 30, 2018 and a 21% U.S. statutory federal tax rate for fiscal years thereafter.

(b)The Company’s effective tax rate is impacted by the geographic mix of its pre-tax income. The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”) which prior to the fiscal year ended June 30, 2018 had lower income tax rates than the U.S. Beginning with the fiscal year ended June 30, 2019, Australia has a higher income tax rate than the U.S.

(c)For the fiscal year ended June 30, 2020, the Company recorded non-cash charges of $1,690 million related to the impairment of goodwill, indefinite-lived intangible assets and fixed assets which reduced the Company’s tax expense by $262 million. These write-downs have an impact on our effective tax rate to the extent a lower tax benefit is recorded.

For the fiscal year ended June 30, 2019, the Company recorded non-cash charges of $96 million related to the impairment of goodwill and indefinite-lived intangible assets, which reduced the Company’s tax expense by $10 million. These write-downs have an impact on our effective tax rate to the extent a lower tax benefit is recorded.

For the fiscal year ended June 30, 2018, the Company recorded non-cash charges of $218 million related to the impairment of goodwill and a write-down of assets and investments of approximately $1.1 billion, which reduced the Company’s tax expense by $54 million and $301 million, respectively. These impairments and write-downs have an impact on our effective tax rate to the extent a lower tax benefit is recorded.

(d)As a result of the Tax Act, the Company recognized a net provisional income tax expense of $237 million primarily related to the re-measurement of U.S. deferred tax balances for the reduction in tax rate, valuation allowances recorded on certain deferred tax assets, and the liability for the transition tax. In fiscal 2020 and fiscal 2019, the Company determined that there were no material changes to the provisional amounts recorded as of June 30, 2018.

(e)Represents the tax effect of the write-off of the FOX SPORTS Australia channel distribution agreement intangible asset as a result of the Transaction, as well as other costs directly attributable to the Transaction.

(f)In the fiscal year ended June 30, 2018, certain pre-Separation tax matters were effectively settled with the Internal Revenue Service. As a result of the settlement, the Company recorded a net income tax benefit of $49 million, comprised of a current tax benefit of $2 million and a deferred tax benefit of $47 million.

(g)For the fiscal years ended June 30, 2020 and 2018, the effective tax rates of (1)% and (33)%, respectively, represent income tax expense when compared to consolidated pre-tax book loss. For the fiscal year ended June 30, 2019, the effective tax rate of 36% represents income tax expense when compared to consolidated pre-tax book income.


	As of June 30,
	2020		2019
	(in millions)
Deferred tax assets:
Accrued liabilities	$	100	$	78
Capital loss carryforwards	886		923
Retirement benefit obligations	56		53
Net operating loss carryforwards	578		397
Business tax credits	93		78
Operating lease liabilities	302		—
Other	197		210
Total deferred tax assets	2,212		1,739
Deferred tax liabilities:
Asset basis difference and amortization	(269)		(266)
Operating lease right-of-use asset	(276)		—
Other	(47)		(31)
Total deferred tax liabilities	(592)		(297)
Net deferred tax asset before valuation allowance	1,620		1,442
Less: valuation allowance (See Note 23—Valuation and Qualifying Accounts)	(1,546)		(1,468)
Net deferred tax assets (liabilities)	$	74	$	(26)

Utilization of the NOLs is dependent on generating sufficient taxable income from our operations in each of the respective jurisdictions to which the NOLs relate, while taking into account tax filing methodologies and limitations and/or restrictions on our ability to use them. Certain of our U.S. federal NOLs were acquired as part of the acquisitions of Move and Harlequin and are subject to limitations as promulgated under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code limits the amount of NOLs that we can use on an annual basis to offset consolidated U.S. taxable income. The NOLs are also subject to review by relevant tax authorities in the jurisdictions to which they relate.

The Company recorded a deferred tax asset of $578 million and $397 million associated with its NOLs (net of approximately $53 million and $44 million, respectively, of unrecognized tax benefits recorded against deferred tax assets) as of June 30, 2020 and 2019, respectively. Significant judgment is applied in assessing our ability to realize our NOLs. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets within the applicable expiration period.

On the basis of this evaluation, valuation allowances of $269 million and $216 million have been established to reduce the deferred tax asset associated with the Company’s NOLs to an amount that will more likely than not be realized as of June 30, 2020 and 2019, respectively.

As of June 30, 2020, the Company had approximately $2.1 billion and $1.5 billion of capital loss carryforwards in Australia and the U.K., respectively, which may be carried forward indefinitely. The capital loss carryforwards are also subject to review by relevant tax authorities in the jurisdictions to which they relate. Realization of our capital losses is dependent on generating capital gain taxable income and satisfying certain continuity of business requirements. The Company recorded a deferred tax asset of $886 million and $923 million as of June 30, 2020 and 2019, respectively, for these capital loss carryforwards. However, it is more likely than not that the Company will not generate capital gain income in the normal course of business in these jurisdictions. Accordingly, valuation allowances of $886 million and $923 million have been established to reduce the capital loss carryforward deferred tax asset to an amount that will more likely than not be realized as of June 30, 2020 and 2019, respectively.

As of June 30, 2020, the Company had approximately $64 million of U.S. federal tax credit carryforwards which includes $32 million of foreign tax credits and $32 million of research and development credits, which begin to expire in 2026 and 2036, respectively.

As of June 30, 2020, the Company had approximately $16 million of non-U.S. tax credit carryforwards which expire in various amounts beginning in 2026 and $13 million of state tax credit carryforwards (net of U.S. federal benefit), which expire in various amounts beginning in 2020.

In accordance with the Company’s accounting policy, a valuation allowance of $46 million has been established to reduce the deferred tax asset associated with the Company’s U.S. foreign tax credits, non-U.S. and state credit carryforwards to an amount that will more likely than not be realized as of June 30, 2020.


	For the fiscal years ended June 30,
	2020		2019		2018
	(in millions)
Balance, beginning of period	$	58	$	62	$	64
Additions for prior year tax positions	4		—		2
Additions for current year tax positions	8		4		3
Reduction for prior year tax positions	(1)		—		(4)
Lapse of the statute of limitations	(3)		(6)		(3)
Settlement—cash	—		—		—
Settlement—tax attributes	(2)		—		(2)
Impact of currency translations	(1)		(2)		2
Balance, end of period	$	63	$	58	$	62

The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense, which is consistent with the recognition in prior reporting periods. The Company recognized a benefit related to interest and penalties of nil for the fiscal year ended June 30, 2020 and $1 million for the fiscal year ended June 30, 2019 and interest and penalty charges of $1 million for the fiscal year ended June 30, 2018. The Company recorded liabilities for accrued interest and penalties of approximately $3 million as of June 30, 2020, 2019 and 2018.

In the fiscal year ended June 30, 2018, certain pre-Separation tax matters were effectively settled with the Internal Revenue Service. As a result of the settlement, the Company recorded a net income tax benefit of $49 million, comprised of a current tax benefit of $2 million and a deferred tax benefit of $47 million.

The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company is currently undergoing tax examinations in the U.S., various states and foreign jurisdictions. During the fiscal year ended June 30, 2018, the Internal Revenue Service commenced an audit of the Company for the fiscal year ended June 30, 2014. The Company effectively settled this audit with no material changes in February 2020. The Company believes it

has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid. However, the Company may need to accrue additional income tax expense and our liability may need to be adjusted as new information becomes known and as these tax examinations continue to progress, or as settlements or litigations occur.

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.

It is reasonably possible that uncertain tax positions may increase or decrease in the next fiscal year, however, actual developments in this area could differ from those currently expected. As of June 30, 2020, approximately $42 million would affect the Company’s effective income tax rate, if and when recognized in future fiscal years. It is reasonably possible, the amount of uncertain tax liabilities which may be resolved within the next fiscal year is between the range of approximately nil and $31 million, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.

Prior to the passage of the Tax Act, the Company asserted that substantially all of its undistributed earnings were considered indefinitely reinvested and accordingly, no deferred taxes were provided. Pursuant to the provisions promulgated in the Tax Act these earnings were subjected to the one-time transition tax, for which a provisional charge was recorded. It is the Company’s intention to reinvest in these subsidiaries indefinitely as the Company does not anticipate the need to repatriate funds to satisfy domestic liquidity needs. An actual repatriation from these subsidiaries could be subject to foreign withholding taxes and U.S. state taxes. Calculation of the unrecognized tax liabilities is not practicable. Undistributed earnings of foreign subsidiaries considered to be indefinitely reinvested amounted to approximately $2.3 billion as of June 30, 2020.

During the fiscal years ended June 30, 2020, 2019 and 2018, the Company paid gross income taxes of $99 million, $144 million and $160 million, respectively, and received income tax refunds of $25 million, $18 million and $7 million, respectively.