Income taxes

9 Months Ended

May 31, 2023

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The effective tax rate for the three months ended May 31, 2023 was a benefit of 86.3%, primarily due to tax benefits from changes to deferred taxes as a result of internal legal entity restructuring, related to the recent business acquisitions, and additional tax benefits claimed upon filing of the Company’s prior year tax returns. The effective tax rate for the three months ended May 31, 2022 was not meaningful. The tax benefit for the three months ended May 31, 2022 was 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 5. Equity method investments for further information), 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 10. Commitments and contingencies for further information).

The effective tax rate for the nine months ended May 31, 2023 was a benefit of 33.8%, 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 nine months ended May 31, 2023. The effective tax rate for the nine months ended May 31, 2022 was 4.3%, primarily due to lower tax expense on gains from consolidation of the Company’s investment in VillageMD and Shields (see Note 2. Acquisitions and other investments for further information), 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 5. Equity method investments for further information), 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 10. Commitments and contingencies for further information).

Income taxes paid for the nine months ended May 31, 2023 and 2022 were $170 million and $291 million, respectively.