Income taxes

6 Months Ended

Feb. 28, 2023

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The effective tax rate for the three months ended February 28, 2023 was 11.5%, compared to 18.2% for the three months ended February 28, 2022. The decrease in the effective tax rate was primarily due to the reduction in the valuation allowance and impact of the opioid-related claims and litigation settlements. The Company recognized a tax benefit due to the reduction of a valuation allowance previously recorded against deferred tax assets related to capital loss carryforwards. The reduction is primarily due to capital loss carryforwards utilized in the current period against capital gains recognized on the sale of shares in AmerisourceBergen. See Note 5. Equity method investments for further information. This benefit was partially offset by the impact of certain nondeductible opioid-related claims recorded in the three months ended February 28, 2023.

The effective tax rate for the six months ended February 28, 2023 was a benefit of 29.5%, primarily due to a reduction in the valuation allowance and impact of the opioid-related claims and litigation settlements. The Company recognized a tax benefit due to the reduction of a valuation allowance previously recorded against deferred tax assets related to capital loss carryforwards. The reduction is primarily due to capital loss carryforwards utilized against capital gains recognized on the sale of shares in AmerisourceBergen and based on forecasted capital gains. This benefit was partially offset by the impact of certain nondeductible opioid-related claims recorded in the six months ended February 28, 2023. The effective tax rate for the six months ended February 28, 2022 was 9.4%, primarily due to lower tax expense on gains from consolidation of the Company’s investment in VillageMD and Shields, as a portion of these gains were not subject to tax. See Note 2. Acquisitions and other investments for further information.

Income taxes paid for the six months ended February 28, 2023 and 2022 were $131 million and $201 million, respectively.