Income Taxes

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

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

	For the years ended June 30,
	2024		2023		2022
	(in millions)
U.S.
Federal	$	300	$	127	$	88
State, local and other	47		35		31
Total current	347		162		119
Deferred	203		321		342
Provision for income taxes	$	550	$	483	$	461

The following table is a reconciliation of income tax computed at the statutory rate to income tax expense:

	For the years ended June 30,
	2024		2023		2022
U.S. federal income tax rate	21	%	21	%	21	%
State and local taxes	4		4		4
Effect of enacted tax law changes	(2)		1		—
Valuation allowance movement	2		2		—
Return to accrual(a)	—		—		2
Nondeductible compensation	1		—		1
Other	—		—		(1)
Effective tax rate	26	%	28	%	27	%

(a) Primarily attributable to a remeasurement of the Company’s net deferred tax assets associated with changes in the mix of jurisdictional earnings.

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

	As of June 30,
	2024		2023
	(in millions)
Deferred tax assets
Basis difference(a)	$	2,645	$	2,911
Operating lease liabilities	232		241
Tax credit carryforwards	96		9
Pension benefit obligations	—		14
Equity-based compensation	39		34
Net operating loss carryforwards	38		37
Other	238		179
Total deferred tax assets	3,288		3,425
Deferred tax liabilities
Operating lease ROU assets	(220)		(229)
Accrued liabilities	(24)		(21)
Pension benefit obligations	(19)		—
Sports rights contracts	(33)		(19)
Total deferred tax liabilities	(296)		(269)
Net deferred tax asset before valuation allowance	2,992		3,156
Less: valuation allowance	(119)		(72)
Total net deferred tax assets(b)	$	2,873	$	3,084

(a)

As a result of the Separation and the Transaction, 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 “The Transaction”).

(b)

Includes a $5 million and $6 million deferred tax liability recorded in Other liabilities in the Balance Sheets as of June 30, 2024 and 2023, respectively.

As of June 30, 2024, the Company had $38 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 net increase in the valuation allowance to $119 million as of June 30, 2024 was primarily due to the additional valuation allowance required on the basis differences on investments.

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

	For the years ended June 30,
	2024		2023		2022
	(in millions)
Balance, beginning of year	$	26	$	28	$	30
Additions for prior year tax positions(a)	6		2		1
Additions for current year tax positions	—		2		2
Reduction for prior year tax positions(b)	(6)		(6)		(5)
Balance, end of year	$	26	$	26	$	28

(a)	The additions for prior year tax positions in fiscal 2024 is primarily due to the impact of state tax law changes.
(b)	The reduction for tax positions in fiscal 2024 of $6 million is primarily due to the expiration of statutes of limitations. The reduction for tax positions in fiscal 2023 of $6 million is primarily due to audit settlements and the expiration of statutes of limitations. The reduction for tax positions in fiscal 2022 includes $5 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 $12 million and $9 million as of June 30, 2024 and 2023, respectively, and the amounts of interest income/expense recorded in each of fiscal 2024, 2023 and 2022 were not material.

The Company is subject to tax primarily 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 consolidated financial condition, future results of operations or liquidity. The movement in the balance of uncertain tax positions in fiscal 2024 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, 2024 and 2023, $20 million and $21 million, respectively, would affect the Company’s effective income tax rate if the Company’s position with respect to the uncertainties is sustained.