Income taxes

9 Months Ended

May 31, 2022

Income Tax Disclosure [Abstract]

Income taxes

Note 12. Income taxes

The Company recognized a tax benefit from continuing operations for the three months ended May 31, 2022. The effective tax rate for the three months ended May 31, 2022 was not meaningful. The tax benefit is primarily driven by reduction of a valuation allowance on net deferred tax assets due to capital gains from the sale of AmerisourceBergen shares (see Note 6. Equity method investments), internal restructuring, and other anticipated gains, as well as the tax benefit related to the opioid settlement agreement with the State of Florida (see Note 11. Commitments and contingencies). The tax rate for the three months ended May 31, 2021 was an expense of 32.8% and 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 from continuing operations for the nine months ended May 31, 2022 was 4.3%, compared to 7.4% for the nine months ended May 31, 2021. The tax rate for the current period includes the discrete tax effect of lower tax expense on gains from consolidation of the Company’s investment in VillageMD and Shields (see Note 3. Acquisitions and other investments), discrete tax benefits recorded for the release of valuation allowance on net deferred tax assets resulting from capital gains derived from the sale of AmerisourceBergen shares (see Note 6. Equity method investments), internal restructuring, and other anticipated gains, as well as the tax benefit related to the opioid settlement agreement with the State of Florida (see Note 11. Commitments and contingencies). The effective tax rate for the prior period reflects the discrete tax effect of equity losses in AmerisourceBergen, partially offset by the tax effect on equity earnings of HC Group Holdings.

Income taxes paid for the nine months ended May 31, 2022 and 2021 were $291 million and $305 million, respectively.