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Income Taxes
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes was derived from the following sources:
202520242023
United States$2,514 $2,120 $1,408 
Foreign1,593 1,475 1,272 
Total$4,107 $3,595 $2,680 
Income taxes include the following:
202520242023
Federal
  Current$424 $328 $161 
  Deferred(98)11 81 
Foreign
  Current374 355 297 
  Deferred(154)16 (13)
State and local
  Current81 34 46 
  Deferred(52)6 24 
Total$575 $750 $596 
A reconciliation of the effective income tax rate to the statutory federal rate follows:
202520242023
Statutory federal income tax rate21.0 %21.0 %21.0 %
State and local income taxes0.6 0.9 2.1 
Tax related to international activities(2.8)2.3 1.2 
Cash surrender value of life insurance(0.1)(0.1)(0.1)
Foreign derived intangible income deduction(1.3)(1.5)(1.1)
Research tax credit(0.4)(0.6)(0.7)
Share-based compensation(1.2)(1.2)(1.0)
Other(1.8)0.1 0.8 
Effective income tax rate14.0 %20.9 %22.2 %
In December 2021, the Organization for Economic Cooperation and Development ("OECD") published a framework, known as Pillar Two, defining a global minimum tax of 15 percent on large corporations. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Several countries have proposed or enacted legislation to implement core elements of the Pillar Two proposal effective for years beginning after December 31, 2023, which for us is fiscal year 2025. Pillar Two does not currently have a significant impact on our consolidated financial statements. Future legislation and guidance may result in a change to our assessment.
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act, (the "Act"), was signed into law. The Act makes various provisions of the 2017 Tax Cuts and Jobs Act permanent while also restoring full expensing of research & development costs and capital investments. The majority of these provisions will impact us starting in fiscal year 2027. We continue to evaluate the future impacts of these provisions and, as of June 30, 2025, have not recorded the impact of any future provisions. We do not expect The Act to have a material impact on our financial statements.
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities. The differences comprising the net deferred taxes shown on the Consolidated Balance Sheet at June 30 were as follows:
20252024
Retirement benefits$27 $124 
Other liabilities and reserves189 214 
Long-term contracts41 45 
Stock-based compensation38 34 
Loss carryforwards114 1,064 
Inventory70 68 
Capitalized research and development172 146 
Tax credit carryforwards45 36 
Unrealized currency exchange gains and losses5 (18)
Undistributed foreign earnings(32)(30)
Depreciation and amortization(1,748)(2,104)
Valuation allowance(141)(1,070)
Net deferred tax (liability)$(1,220)$(1,491)
Change in net deferred tax (liability):
Provision for deferred tax$304 $(32)
Items of other comprehensive (loss) income(44)(24)
Acquisitions and other11 133 
Total change in net deferred tax$271 $77 
The following schedule presents the changes in deferred tax asset valuation allowance as follows:
Balance at
Beginning
of Period		(Deductions)/Additions
Charged to
Costs and
Expenses
Other
(Deductions)/
Additions(1)
Balance
at End
of Period
Deferred tax asset valuation allowance:
Year ended June 30, 2023$902 $163 $13 $1,078 
Year ended June 30, 20241,078 (10)2 1,070 
Year ended June 30, 20251,070 (929)— 141 
(1) The balance primarily represents adjustments due to acquisitions.
During the year ended June 30, 2025, we completed an initiative that simplified our foreign legal entity structure. The initiative impacted our evaluation of certain foreign tax loss carryforwards whose realizability was previously considered to be remote. This led to a valuation allowance release and the recording of a $180 million discrete tax benefit. Additionally, as a result of the initiative, $784 million in deferred tax assets for certain other foreign tax loss carryforwards whose realizability was previously considered to be remote, and the associated valuation allowances, were also written off.
As of June 30, 2025, we recorded deferred tax assets of $114 million resulting from $492 million in loss carryforwards. A valuation allowance of $106 million related to the loss carryforwards has been established due to the uncertainty of their realization. Of this valuation allowance, $92 million relates to non-operating entities whose loss carryforward utilization is considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward from three years to 20 years. In addition, a valuation allowance of $35 million related to other future deductible items has been established due to the uncertainty of their realization.
Although future distributions of foreign earnings to the United States should not be subject to U.S. federal income taxes, other U.S. or foreign taxes may be imposed on such earnings. We have analyzed existing factors and determined we will no longer permanently reinvest certain foreign earnings. On these undistributed foreign earnings of approximately $484 million that are no longer permanently reinvested outside of the United States, we have recorded a deferred tax liability of $16 million. The
remaining undistributed foreign earnings of approximately $1,011 million remain permanently reinvested outside the United States at June 30, 2025. Of these undistributed earnings, we have recorded a deferred tax liability of $17 million where certain foreign holding companies are not permanently reinvested in their subsidiaries. It is not practicable to estimate the additional taxes, including applicable foreign withholding taxes, that might be payable on the potential distribution of such permanently reinvested foreign earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
202520242023
Balance July 1$102 $114 $91 
Additions for tax positions related to current year6 6 9 
Additions for tax positions of prior years19 — 6 
Additions for acquisitions— 4 26 
Reductions for tax positions of prior years— (5)(3)
Reductions for settlements— — (7)
Reductions for expiration of statute of limitations(27)(15)(11)
Effect of foreign currency translation4 (2)3 
Balance June 30$104 $102 $114 
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $104 million, $102 million and $114 million as of June 30, 2025, 2024 and 2023, respectively. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $28 million, $27 million, and $21 million as of June 30, 2025, 2024 and 2023, respectively. The accrued penalties related to the gross unrecognized tax benefits, excluded from the amounts above, was $2 million as of June 30, 2025, 2024, and 2023.
It is reasonably possible that, within the next 12 months, the amount of gross unrecognized tax benefits could be reduced by up to approximately $60 million as a result of the revaluation of existing uncertain tax positions arising from developments in the examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12 months is expected to be insignificant.
We file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. We are open to assessment of our U.S. federal income tax returns by the Internal Revenue Service for years after 2013, and our state and local income tax returns for years after 2018. We are open to assessment for significant foreign jurisdictions for years after 2013.