INCOME TAXES

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The provision for income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:

	2022		2021		2020
Current
Federal	$	71	$	146	$	171
State	17		26		32
Foreign	43		41		45
Total current	$	131	$	213	$	248
Deferred
Federal	$	6	$	(26)	$	13
State	(2)		(9)		(5)
Foreign	1		3		(10)
Total deferred	5		(32)		(2)
Total	$	136	$	181	$	246

The components of Earnings before income taxes, by tax jurisdiction, consisted of the following for the fiscal years ended June 30:

	2022		2021		2020
United States	$	483	$	696	$	1,041
Foreign	124		204		144
Total	$	607	$	900	$	1,185

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate on operations follows for the fiscal years ended June 30:

	2022		2021		2020
Statutory federal tax rate	21.0	%	21.0	%	21.0	%
State taxes (net of federal tax benefits)	1.9		1.5		1.7
Foreign tax rate differential	3.1		0.2		0.9
Federal excess tax benefits	(0.9)		(2.7)		(2.4)
Net U.S. tax on foreign income	(1.7)		(0.5)		(0.2)
Other differences	(1.0)		0.6		(0.2)
Effective tax rate	22.4	%	20.1	%	20.8	%

Per U.S. GAAP, foreign withholding taxes are provided on unremitted foreign earnings that are not indefinitely reinvested at the time the earnings are generated. The Company regularly reviews and assesses whether there are any changes to its indefinite reinvestment assertion. None of the undistributed earnings of its foreign subsidiaries were indefinitely reinvested. As a result, the Company is providing foreign withholding taxes on the undistributed earnings of all foreign subsidiaries where applicable. These withholding taxes had no significant impact on the Company’s consolidated results.

The components of net deferred tax assets (liabilities) as of June 30 are shown below:

	2022		2021
Deferred tax assets
Compensation and benefit programs	$	100	$	104
Net operating loss and tax credit carryforwards	93		85
Operating and finance lease liabilities	98		100
Accruals and reserves	35		39
Basis difference related to the Venture Agreement	19		19
Inventory costs	25		18
Other	13		15
Subtotal	383		380
Valuation allowance	(52)		(42)
Total deferred tax assets	$	331	$	338
Deferred tax liabilities
Fixed and intangible assets	$	(242)	$	(232)
Lease right-of-use assets	(91)		(94)
Other	(29)		(41)
Total deferred tax liabilities	(362)		(367)
Net deferred tax assets (liabilities)	$	(31)	$	(29)

The Company reviews its deferred tax assets for recoverability on a quarterly basis. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Valuation allowances have been provided to reduce deferred tax assets to amounts considered recoverable. Details of the valuation allowance were as follows as of June 30:

	2022		2021		2020
Valuation allowance at beginning of year	$	(42)	$	(38)	$	(44)
Net decrease/(increase) for other foreign deferred tax assets	(1)		(1)		1
Net decrease/(increase) for foreign and U.S. net operating loss carryforwards and tax credits	(9)		(3)		5
Valuation allowance at end of year	$	(52)	$	(42)	$	(38)

As of June 30, 2022, the Company had foreign tax credit carryforwards of $27 for U.S. income tax purposes with expiration dates between fiscal years 2025 and 2032. Tax credit carryforwards in U.S. jurisdictions of $2 have expiration dates between fiscal year 2023 and 2032. Tax credit carryforwards in U.S. jurisdictions of $2 can be carried forward indefinitely. Tax credit carryforwards in foreign jurisdictions of $28 can be carried forward indefinitely. Tax benefits from net operating loss carryforwards in U.S. jurisdictions of $3 have expiration dates between fiscal years 2030 and 2041. Tax benefits from net operating loss carryforwards in U.S. jurisdictions of $4 can be carried forward indefinitely. Tax benefits from foreign net operating loss carryforwards of $19 have expiration dates between fiscal years 2023 and 2036. Tax benefits from foreign net operating loss carryforwards of $8 can be carried forward indefinitely.

The Company files income tax returns in the U.S. federal and various state, local and foreign jurisdictions. The federal statute of limitations has expired for all tax years through June 30, 2015. Various income tax returns in state and foreign jurisdictions are currently in the process of examination.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense. As of June 30, 2022 and 2021, the total balance of accrued interest and penalties related to uncertain tax positions was $2 and $2, respectively. Interest and penalties related to uncertain tax positions included in income tax expense resulted in a net benefit of $0 in fiscal year 2022, a net benefit of $0 in fiscal year 2021 and a net benefit of $2 in fiscal year 2020.

The following is a reconciliation of the beginning and ending amounts of the Company’s gross unrecognized tax benefits:

	2022		2021		2020
Unrecognized tax benefits at beginning of year	$	21	$	22	$	31
Gross increases - tax positions in prior periods	—		1		1
Gross decreases - tax positions in prior periods	(7)		(5)		(11)
Gross increases - current period tax positions	4		3		4
Gross decreases - current period tax positions	—		—		—
Lapse of applicable statute of limitations	(1)		—		(1)
Settlements	—		—		(2)
Unrecognized tax benefits at end of year	$	17	$	21	$	22

Included in the balance of unrecognized tax benefits as of June 30, 2022, 2021 and 2020, were potential benefits of $14, $17 and $17, respectively, which if recognized, would affect the effective tax rate. Unrecognized tax benefits are not expected to significantly increase or decrease within the next 12 months.