Income Taxes

12 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 16. INCOME TAXES

For purposes of the Company’s Financial Statements for the periods prior to the Distribution, the income tax provision in the Statements of Operations was calculated as if FOX filed a separate tax return and was operating as a standalone business. Therefore, cash tax payments and items of current and deferred taxes may not be reflective of FOX’s actual tax balances prior to or subsequent to the Distribution.

Income before income tax (expense) benefit was attributable to the U.S. jurisdiction. Significant components of the Company’s provision for income taxes were as follows:

	For the years ended June 30,
	2021		2020		2019
	(in millions)
U.S.
Federal	$	181	$	110	$	127
State, local and other		2		9		68
Total current		183		119		195
Deferred		534		283		386
Provision for income taxes	$	717	$	402	$	581

The reconciliation of income tax computed at the statutory rate to income tax (expense) benefit was:

	For the years ended June 30,
	2021				2020				2019
U.S. federal income tax rate		21		%		21		%		21	%
State and local taxes		4				4				4
Nondeductible compensation		1				2				-
Valuation allowance movements		-				1				-
Adjustments for tax matters, net		(1	)			(1	)			-
Other		-				-				1
Effective tax rate		25		%		27		%		26	%

The following is a summary of the components of the deferred tax accounts:

	As of June 30,
	2021			2020
	(in millions)
Deferred tax assets
Basis difference(a)	$	3,676		$	4,176
Operating lease liabilities		121			140
Pension benefit obligations		64			93
Equity-based compensation		33			31
Accrued liabilities		37			31
Net operating loss carryforwards		18			28
Other		117			120
Total deferred tax assets		4,066			4,619
Deferred tax liabilities
Operating lease ROU assets		(114	)		(133	)
Sports rights contracts		(108	)		(110	)
Total deferred tax liabilities		(222	)		(243	)
Net deferred tax asset before valuation allowance		3,844			4,376
Less: valuation allowance		(24	)		(20	)
Total net deferred tax assets(b)	$	3,820		$	4,356

^(a) As a result of the Separation and the Distribution, which was a taxable transaction for which the estimated tax liability of $5.8 billion was included in the Transaction Tax paid by the Company, FOX obtained a tax basis in its assets equal to their respective fair market values. This amount includes the additional estimated deferred tax asset recorded as a result of the increased tax basis (See Note 1—Description of Business and Basis of Presentation under the heading “Basis of Presentation”).

^(b) Includes a $2 million deferred tax liability recorded in Other liabilities on the Consolidated Balance Sheet as of June 30, 2021 and 2020.

As of June 30, 2021, the Company had $18 million of tax attributes from net operating loss carryforwards available to offset future taxable income. A substantial portion of these losses can be carried forward indefinitely. The Company also had $10 million of tax attributes from capital loss carry forwards available to offset future capital gains. A substantial portion of these capital losses can be carried forward for four years.

The net increase in the valuation allowance to $24 million as of June 30, 2021 was primarily due to the additional valuation allowance required on net operating loss carryforwards not expected to be utilized.

The following table sets forth the change in the uncertain tax positions, excluding interest and penalties:

	For the years ended June 30,
	2021				2020				2019
	(in millions)
Balance, beginning of year	$	73			$	94			$	91
Additions for prior year tax positions		-				1				7
Additions for current year tax positions		2				2				9
Reduction for prior year tax positions		(45	)	(a)		(24	)	(a)		(13	)
Balance, end of year	$	30			$	73			$	94

^(a) The reduction for prior year tax positions in fiscal 2021 includes $31 million from the settlement of audits and $14 million from the expiration of statutes of limitations. The reduction for prior year tax positions in fiscal 2020 includes $21 million from the expiration of statutes of limitations.

The Company recognizes interest and penalty charges related to uncertain tax positions as income tax (expense) benefit. The Company recorded liabilities for accrued interest of $11 million and $22 million as of June 30, 2021 and 2020, respectively, and the amounts of interest income/expense recorded in each of the three fiscal years 2021, 2020 and 2019 were not material.

The Company is subject to tax in various domestic jurisdictions and, as a matter of ordinary course, the Company is regularly audited by federal and state tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not anticipate that the resolution of these pending tax matters will have a material adverse effect on its combined financial condition, future results of operations or liquidity. The net decrease to the balance of uncertain tax positions in fiscal 2021 is primarily attributable to state matters. The Company does not expect significant changes to these positions over the next 12 months. As of June 30, 2021 and 2020, $24 million and $58 million, respectively, would affect the Company’s effective income tax rate if the Company’s position with respect to the uncertainties is sustained.