XML 42 R17.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Income Taxes
 12 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
9. Income Taxes
Earnings/(Loss) before Income Taxes and Provision for/(Benefit From) Income Taxes
The following table summarizes earnings/(loss) before income taxes:
(in millions)202420232022
U.S. operations$892 $316 $(1,015)
Non-U.S. operations309 347 231 
Earnings/(loss) before income taxes$1,201 $663 $(784)
The following table summarizes the components of provision for/(benefit from) income taxes:
(in millions)202420232022
Current:
Federal$305 $219 $16 
State and local68 69 30 
Non-U.S.79 84 93 
Total current$452 $372 $139 
Deferred:
Federal$(89)$(23)$42 
State and local12 11 (27)
Non-U.S.(27)(28)(1)
Total deferred$(104)$(40)$14 
Provision for/(benefit from) income taxes$348 $332 $153 

Tax Effects of Goodwill Impairment Charges
During fiscal 2024, 2023 and 2022, we recognized cumulative pre-tax goodwill impairment charges of $675 million, $1.2 billion and $2.1 billion, respectively, related to GMPD. The net tax benefits related to these charges were $58 million, $92 million and $140 million during fiscal 2024, 2023 and 2022, respectively.
Effective Tax Rate
The following table presents a reconciliation of the provision based on the federal statutory income tax rate to our effective income tax rate:
 202420232022
Provision at Federal statutory rate21.0 %21.0 %21.0 %
State and local income taxes, net of federal benefit3.1 6.5 2.0 
Tax effect of foreign operations(1.6)(5.4)4.7 
Nondeductible/nontaxable items(0.1)(1.1)1.2 
Impact of Divestitures— (1.9)(4.8)
Withholding Taxes1.0 1.0 (1.1)
Change in Valuation Allowances(1.1)(5.1)3.5 
US Taxes on International Income (2)
(2.1)0.6 1.9 
Impact of Resolutions with IRS and other related matters 0.4 0.3 1.6 
Opioid litigation1.0 0.1 (0.5)
Goodwill Impairment8.7 33.8 (49.9)
Other (1.4)0.2 0.9 
Effective income tax rate28.9 %50.0 %(19.5)%
(1)    This table reflects fiscal 2024 and 2023 pretax income with tax expense, fiscal 2022 pretax loss with tax expense.
(2)    Includes the tax impact of Global Intangible Low-Taxed Income ("GILTI") tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S. tax code.
The income tax rate was 28.9%, 50.0% and (19.5)% in fiscal 2024, 2023 and 2022, respectively. Fluctuations in the effective tax rates are primarily due to the impact of goodwill impairment in each of these fiscal years. Additionally, laws governing insurance coverage vary by state and some state courts have interpreted laws and insurance policies in ways that may impact our self-insurance loss, which could negatively impact our financial position.
Our effective tax rate has benefits from negotiated lower than statutory tax rates in select foreign jurisdictions which individually are not material to our effective tax rate but in aggregate had a favorable tax impact of approximately $23 million during fiscal 2024.
As of June 30, 2024, foreign earnings of approximately $1.0 billion are considered indefinitely reinvested for working capital and other offshore investment needs. The computation of tax required if those earnings are repatriated is not practicable. For amounts not considered indefinitely reinvested, we have recorded an immaterial amount of income tax expense in our consolidated financial statements in fiscal 2024.
Deferred Income Taxes
Deferred income taxes arise from temporary differences between financial reporting and tax reporting bases of assets and liabilities and operating loss and tax credit carryforwards for tax purposes.
The following table presents the components of the deferred income tax assets and liabilities at June 30:
(in millions)20242023
Deferred income tax assets:
Receivable basis difference$81 $74 
Accrued liabilities749 704 
Share-based compensation28 29 
Loss and tax credit carryforwards512 672 
Deferred tax assets related to uncertain tax positions45 39 
Other76 58 
Total deferred income tax assets1,491 1,576 
Valuation allowance for deferred income tax assets(300)(421)
Net deferred income tax assets$1,191 $1,155 
Deferred income tax liabilities:
Inventory basis differences$(1,122)$(1,229)
Property-related(350)(336)
Goodwill and other intangibles(710)(624)
Self-Insurance(981)(975)
Total deferred income tax liabilities$(3,163)$(3,164)
Net deferred income tax liability
$(1,972)$(2,009)
Deferred income tax assets and liabilities in the preceding table, after netting by taxing jurisdiction and for uncertain tax positions, are in the following captions in the consolidated balance sheets at June 30:
(in millions)20242023
Noncurrent deferred income tax asset (1)$72 $53 
Noncurrent deferred income tax liability (2)(2,044)(2,060)
Noncurrent deferred income tax liability transferred to held for sale— (2)
Net deferred income tax liability$(1,972)$(2,009)
(1)Included in other assets in the consolidated balance sheets.
(2)Included in deferred income taxes and other liabilities in the consolidated balance sheets.
At June 30, 2024 we had gross federal, state and international loss and credit carryforwards of $401 million, $10.7 billion and $1.1 billion, respectively, the tax effect of which is an aggregate deferred tax asset of $512 million. Substantially all of these carryforwards are available for at least three years. Approximately $288 million of the valuation allowance at June 30, 2024 applies to certain federal, state and international loss carryforwards that, in our opinion, are more likely than not to expire unutilized. However, to the extent that tax benefits related to these carryforwards are realized in the future, the reduction in the valuation allowance would reduce income tax expense.
Unrecognized Tax Benefits
We had $981 million, $1.0 billion and $948 million of unrecognized tax benefits at June 30, 2024, 2023 and 2022, respectively. The June 30, 2024, 2023 and 2022 balances include $882 million, $878 million and $866 million, respectively, of unrecognized tax
benefits that, if recognized, would have an impact on the effective tax rate. The remaining unrecognized tax benefits relate to tax positions for which ultimate deductibility is highly certain but for which there is uncertainty as to the timing of such deductibility. Recognition of these tax benefits would not affect our effective tax rate. We include the full amount of unrecognized tax benefits in deferred income taxes and other liabilities in the consolidated balance sheets. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:
(in millions)202420232022
Balance at beginning of fiscal year$1,015 $948 $957 
Additions for tax positions of the current year30 25 7 
Additions for tax positions of prior years28 133 19 
Reductions for tax positions of prior years(87)(16)(19)
Settlements with tax authorities (3)(73)(12)
Expiration of the statute of limitations (2)(2)(4)
Balance at end of fiscal year
$981 $1,015 $948 

It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next 12 months due to activities of the U.S. Internal Revenue Service ("IRS") or other taxing authorities, possible settlement of audit issues, reassessment of existing unrecognized tax benefits or the expiration of statutes of limitations. We estimate that the range of the possible change in unrecognized tax benefits within the next 12 months is between zero and a net decrease of up to $20 million, exclusive of penalties and interest.
We recognize accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. At June 30, 2024, 2023 and 2022, we had $65 million, $65 million and $48 million, respectively, accrued for the payment of interest and penalties. These balances are gross amounts before any tax benefits and are included in deferred income taxes and other liabilities in the consolidated balance sheets. As a result of our IRS audit settlements and carryback claim, an immaterial amount of interest was recorded in fiscal 2024, 2023 and 2022.
Other Tax Matters
We file income tax returns in the U.S. federal jurisdiction, various U.S. state and local jurisdictions and various foreign jurisdictions. With few exceptions, we are subject to audit by taxing authorities for fiscal years 2015 through the current fiscal year.
Expiring or unusable loss and credit carryforwards and the required valuation allowances are adjusted quarterly based on available information. This information may support either an increase or a decrease in the required valuation allowance. After applying the valuation allowances, we do not anticipate any limitations on our use of any of the other net deferred income tax assets described above. We operate in a complex multinational tax environment and are subject to tax treaty arrangements and transfer pricing guidelines for intercompany transactions that are subject to interpretation. Uncertainty in a tax position may arise as tax laws are subject to interpretation.