Income taxes

9 Months Ended

May 31, 2021

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The effective tax rate for the three months ended May 31, 2021 was 32.8%, compared to 2.3% for the three months ended May 31, 2020. The tax rate for the current period includes a discrete tax expense on equity earnings of $576 million from HC Group Holdings. See Note 6 Equity method investments for further information. The effective tax rate for the prior period reflects a tax benefit on a pretax loss and is primarily driven by the impact of a non-deductible goodwill impairment charge.

The effective tax rate for the nine months ended May 31, 2021 was an expense of 7.4%, primarily due to the discrete tax effect of equity losses in AmerisourceBergen, partially offset by the tax effect of equity earnings of HC Group Holdings. The effective tax rate for the nine months ended May 31, 2020 was an expense of 230.0%, on a pretax loss for the nine months ended May 31, 2020 primarily due to a non-deductible goodwill impairment charge.

Income taxes paid for the nine months ended May 31, 2021 were $305 million, compared to $604 million for the nine months ended May 31, 2020.

During the next twelve months, based on current knowledge, it is reasonably possible the amount of unrecognized tax benefits could decrease by up to $110 million due to anticipated U.S. federal income tax audit settlements.

During the nine months ended May 31, 2021, the Company recognized an increase in uncertain tax benefits, resulting in a reduction in deferred tax assets for capital loss carryforwards and corresponding valuation allowance.

On June 10, 2021 the UK Finance Act 2021 was enacted increasing the UK tax rate from 19% to 25% effective April 1, 2023. The Company is evaluating the potential impact of the tax rate increase on its financial statements, which the Company anticipates will result in tax expense related to revaluing the UK net deferred tax liabilities in the fourth quarter of fiscal 2021.