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Income Taxes
 6 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense related to continuing operations was as follows:
Three Months Ended September 30, Six Months Ended September 30,
(Dollars in millions)2022202120222021
Income tax expense$271 $132 $470 $158 
Reported income tax rate21.8 %29.9 %20.9 %15.7 %
Fluctuations in the Company’s reported income tax rates were primarily due to non-cash charges related to remeasuring the value of the E.U. disposal group in the second quarter of fiscal 2022, changes in the mix of earnings between various taxing jurisdictions, and discrete benefits recognized in the quarters.
During the three months ended September 30, 2022 and 2021, the Company recognized a net discrete tax benefit primarily related to increased tax credits of $16 million and a decrease in the global intangible low-tax income (“GILTI”) of $55 million, respectively. During the six months ended September 30, 2022, the Company recognized a net discrete tax benefit primarily related to the tax impact of share-based compensation of $53 million. During the six months ended September 30, 2021, the Company also recognized a net discrete tax benefit primarily related to statute of limitation expirations of $97 million in various taxing jurisdictions.
During the second quarter of fiscal 2022, the Company recorded non-cash pre-tax charges totaling $491 million primarily to remeasure the assets and liabilities of the E.U. disposal group to fair value less costs to sell, as described in Financial Note 2, “Business Acquisitions and Divestitures.” The Company’s reported income tax rates for the three and six months ended September 30, 2021 were unfavorably impacted by this due to the non-deductible nature of the majority of these charges for income tax purposes.
As of September 30, 2022, the Company had $1.5 billion of unrecognized tax benefits, of which $1.3 billion would reduce income tax expense and the effective tax rate if recognized. During the next twelve months, it is reasonably possible that our unrecognized tax benefits may decrease by as much as $150 million to $180 million due to settlements of tax examinations and statute of limitation expirations based on the information currently available. However, this may change as the Company continues to have ongoing discussions with various taxing authorities throughout the year, and if the ultimate resolution of unrecognized tax benefits differs from this estimated range, the Company will record any additional income tax expense or benefit as necessary in the appropriate period. The unrecognized tax benefit may also increase or decrease due to future developments in opioid-related litigation and claims, as discussed in Financial Note 12, “Commitments and Contingent Liabilities.”
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and various foreign jurisdictions. The Internal Revenue Service (“IRS”) is currently examining the Company’s U.S. corporation income tax returns for 2018 and 2019. The Company is generally subject to audit by taxing authorities in various U.S. states and in foreign jurisdictions for fiscal years 2014 through the current fiscal year.
The Company is a party to a certain tax receivable agreement (“TRA”) entered into as part of the formation of the joint venture with Change Healthcare Inc. (“Change”), from which McKesson has since exited. The TRA generally requires Change to pay McKesson 85% of the net cash tax savings realized, or deemed to be realized, by Change resulting from the amortization allocated to Change by the joint venture. In October 2022, Change exercised its right pursuant to the TRA to terminate the agreement. The Company received $126 million in the third quarter of fiscal 2023 due to early termination of the TRA, which will result in a gain within “Other income, net” in the Condensed Consolidated Statements of Operations.