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INCOME TAXES
 12 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
We have elected to account for the tax effects of Global Intangible Low-Taxed Income (GILTI) as a current period expense when incurred.
Earnings before income taxes consisted of the following:
Fiscal years ended June 30202420232022
United States$12,246 $12,107 $11,698 
International6,515 6,246 6,297 
TOTAL$18,761 $18,353 $17,995 
Income taxes consisted of the following:
Fiscal years ended June 30202420232022
CURRENT TAX EXPENSE
U.S. federal$1,954 $2,303 $1,916 
International1,708 1,412 1,333 
U.S. state and local368 353 355 
TOTAL4,031 4,068 3,604 
DEFERRED TAX EXPENSE/(BENEFIT)
U.S. federal(133)(224)(320)
International and other(111)(229)(82)
TOTAL(244)(453)(402)
TOTAL TAX EXPENSE$3,787 $3,615 $3,202 
A reconciliation of the U.S. federal statutory income tax rate to our actual effective income tax rate is provided below:
Fiscal years ended June 30202420232022
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
Country mix impacts of foreign operations0.1 %(0.5)%(0.3)%
State income taxes, net of federal benefit1.8 %1.6 %1.5 %
Excess tax benefits from the exercise of stock options(1.5)%(1.0)%(2.0)%
Foreign derived intangible income deduction (FDII)(1.1)%(0.8)%(1.1)%
Changes in uncertain tax positions0.1 %0.1 %(0.4)%
Other(0.2)%(0.7)%(0.9)%
EFFECTIVE INCOME TAX RATE20.2 %19.7 %17.8 %
Country mix impacts of foreign operations includes the effects of foreign subsidiaries' earnings taxed at rates other than the U.S. statutory rate, the U.S. tax impacts of non-U.S. earnings repatriation and any net impacts of intercompany transactions. Excess tax benefits from the exercise of stock options reflect the excess of actual tax benefits received on employee exercises of stock options and other share-based payments (which generally equals the income taxable to the employee) over the amount of tax benefits that were calculated and recognized based on the grant date fair values of such instruments. Changes in uncertain tax positions represent changes in our net liability related to prior year tax positions.
Prior to the passage of the U.S. Tax Act, the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely invested and, accordingly, no deferred taxes were provided. Pursuant to the provisions of the U.S. Tax Act, these earnings were subjected to a one-time transition tax. This charge included taxes for all U.S. income taxes and for the related foreign withholding taxes for the portion of those earnings which are no longer considered indefinitely invested. We have not provided deferred taxes on approximately $22 billion of earnings that are considered indefinitely invested.
A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:
Fiscal years ended June 30202420232022
BEGINNING OF YEAR$515 $583 $627 
Increases in tax positions for prior years157 113 102 
Decreases in tax positions for prior years(133)(119)(118)
Increases in tax positions for current year160 60 53 
Settlements with taxing authorities(100)(108)(42)
Lapse in statute of limitations(9)(7)(17)
Currency translation(8)(7)(22)
END OF YEAR$582 $515 $583 
Included in the total liability for uncertain tax positions at June 30, 2024, is $488 that, depending on the ultimate resolution, could impact the effective tax rate in future periods.
The Company is present in about 70 countries and over 150 taxable jurisdictions and, at any point in time, has 30-40 jurisdictional audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for
uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and the closing of statutes of limitation. Such adjustments are reflected in the tax provision as appropriate. We have tax years open ranging from 2010 and forward. We are generally not able to reliably estimate the timing and ultimate settlement amounts until the close of an audit. Based on information currently available, we do not anticipate over the next 12-month period any significant audit activity concluding related to uncertain tax positions for which we have existing accrued liabilities.
We recognize the additional accrual of any possible related interest and penalties relating to the underlying uncertain tax position in income tax expense. As of June 30, 2024 and 2023, we had accrued interest of $111 and $143 and accrued penalties of $15 and $12, respectively, which are not included in the above table. During the fiscal years ended June 30, 2024, 2023 and 2022, we recognized $18, $23 and $21 in interest expense and $4, $1 and $2 in penalties expense, respectively.
Deferred income tax assets and liabilities were comprised of the following:
As of June 3020242023
DEFERRED TAX ASSETS
Capitalized research & development$1,140 $930 
Loss and other carryforwards892 1,014 
Pension and other retiree benefits592 737 
Accrued marketing and promotion460 421 
Stock-based compensation433 412 
Fixed assets206 223 
Lease liabilities199 197 
Unrealized loss on financial and foreign exchange transactions107 282 
Other843 874 
Valuation allowances(290)(403)
TOTAL$4,582 $4,687 
DEFERRED TAX LIABILITIES
Goodwill and other intangible assets$5,459 $5,811 
Fixed assets1,573 1,556 
Other retiree benefits1,319 1,101 
Unrealized gain on financial and foreign exchange transactions263 198 
Lease right-of-use assets196 191 
Foreign withholding tax on earnings to be repatriated104 96 
Other441 381 
TOTAL$9,355 $9,334 
Net operating loss carryforwards were $2.3 billion at June 30, 2024, and $2.9 billion at June 30, 2023. If unused, approximately $100 will expire between 2024 and 2043. The remainder, totaling $2.2 billion at June 30, 2024, may be carried forward indefinitely.