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INCOME TAXES
 12 Months Ended
Jun. 29, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income Tax Provisions

For financial reporting purposes, earnings before income taxes consists of the following:
 202420232022
 (In millions)
U.S.$2,260 $1,941 $1,643 
Foreign305 344 104 
Total$2,565 $2,285 $1,747 

The income tax provision for each fiscal year consists of the following:
 202420232022
 (In millions)
U.S. federal income taxes$447 $388 $354 
State and local income taxes125 79 45 
Foreign income taxes38 48 (11)
Total$610 $515 $388 

The current and deferred components of the income tax provisions for each fiscal year are as follows:
 202420232022
 (In millions)
Current$584 $531 $452 
Deferred26 (16)(64)
Total$610 $515 $388 

The deferred tax provisions result from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Effective Tax Rates
Reconciliations of the statutory federal income tax rate to the effective income tax rates for each fiscal year are as follows:
 202420232022
U.S. statutory federal income tax rate21.0 %21.0 %21.0 %
State and local income taxes, net of any applicable federal income tax benefit3.9 2.6 2.4 
Foreign income taxes(1.0)(1.1)(1.9)
Uncertain tax positions0.1 0.1 0.8 
Tax benefit of equity-based compensation0.1 (0.1)(0.1)
Other(0.3)0.1 — 
Effective income tax rate23.8 %22.6 %22.2 %

The effective tax rate of 23.8% for fiscal 2024 was impacted by (1) state income tax expense of $99 million and (2) the mix of earnings from our foreign operations which are taxed at rates different than our domestic tax rate, as well as credits, local permanent differences and other minimum taxes, which resulted in a net increase in the effective tax rate.

The effective tax rate of 22.6% for fiscal 2023 was impacted by (1) state income tax expense of $60 million and (2) earnings from our foreign operations which are taxed at rates different than our domestic tax rate, as well as credits, local permanent differences and other minimum taxes, which resulted in a net increase in the effective tax rate.

Deferred Tax Assets and Liabilities

Significant components of Sysco’s deferred tax assets and liabilities are as follows:
 Jun. 29, 2024Jul. 1, 2023
 (In millions)
Deferred tax assets: 
Net operating tax loss carryforwards$534 $537 
Operating lease liabilities237 171 
Interest carryforwards228 205 
Pension121 101 
Receivables52 51 
Inventory30 27 
Deferred compensation28 26 
Share-based compensation27 24 
Other67 60 
Deferred tax assets before valuation allowances1,324 1,202 
Valuation allowances(278)(267)
Total deferred tax assets1,046 935 
Deferred tax liabilities:  
Goodwill and intangible assets374 364 
Excess tax depreciation and basis differences of assets285 238 
Operating lease assets231 172 
Foreign currency remeasurement losses and currency hedge20 16 
Other36 28 
Total deferred tax liabilities946 818 
Total net deferred tax assets$100 $117 

Our deferred tax asset for net operating loss carryforwards as of June 29, 2024 and July 1, 2023 consisted of state and foreign net operating tax loss carryforwards. The state net operating loss carryforwards outstanding as of June 29, 2024 expire
in fiscal years 2025 through 2044, with some losses having unlimited carryforward periods. The foreign net operating loss carryforward periods vary by jurisdiction, from 5 years to unlimited.

We assess the recoverability of our deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. We consider all available evidence (both positive and negative) in determining whether a valuation allowance is required. As a result of the company’s analysis, it was concluded that, as of June 29, 2024, a valuation allowance of $278 million should be established against the portion of the deferred tax asset attributable to capital losses, certain state interest, and foreign and U.S. state losses. We will continue to monitor facts and circumstances in the reassessment of the likelihood that net operating loss carryforwards will be realized.

Uncertain Tax Positions

Our uncertain tax position balance was $32 million in both fiscal 2024 and fiscal 2023. The gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $12 million as of June 29, 2024 and $8 million as of July 1, 2023. The expense recorded for interest and penalties related to unrecognized tax benefits was not material in any year presented. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months. At this time, an estimate of the range of the reasonably possible change cannot be made.

During fiscal 2023, Sysco received a Statutory Notice of Deficiency from the Internal Revenue Service, mainly related to foreign tax credits generated in fiscal 2018 from repatriated earnings primarily from our Canadian operations. In the fourth quarter of fiscal 2023, we filed suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would affirm our position regarding our foreign tax credits. We previously recorded a benefit of $131 million attributable to our interpretation of the TCJA and the Internal Revenue Code. If we are ultimately unsuccessful in defending our position, we may be required to reverse all, or some portion, of the benefit previously recorded.

If we were to recognize all unrecognized tax benefits recorded as of June 29, 2024 and July 1, 2023, approximately all of the $32 million reserve would reduce the effective tax rate for each year, respectively. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of our unrecognized tax positions will increase or decrease in the next twelve months either because our positions are sustained on audit or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax benefits primarily include the consideration of various filing requirements in various jurisdictions and the allocation of income and expense between tax jurisdictions. In addition, the amount of unrecognized tax benefits recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years in various jurisdictions; however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring. We anticipate an immaterial decrease to the reserve within twelve months as a result of lapse of statutes.

We remain subject to income tax examinations for our U.S. federal income taxes for fiscal 2018 and subsequent tax years. As of June 29, 2024, Sysco’s tax returns in the majority of the state and local and material foreign jurisdictions are no longer subject to audit for the years before 2017. 

Other

We intend to indefinitely reinvest income of our foreign operations except for income from a Singapore entity, and, as a result, no material accruals have been made with respect to the tax effects of unremitted earnings from these reinvested foreign earnings, including impacts of outside basis differences and withholding taxes. The Singapore income for which we are not claiming permanent reinvestment only relates to income for fiscal year 2023 and forward. The company has not recorded any withholding tax liability on the current year undistributed Singapore earnings, as the distribution of this income to the U.S. would not result in any income or withholding tax liability. As a result of the U.S. Tax Cuts and Jobs Act, unremitted earnings prior to the effective date of the act have been subject to U.S. income tax. Any residual tax effects, including foreign withholding taxes, are immaterial to the financial statements.

On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy. Pillar One expands a country’s authority to tax profits from companies that make sales into their country but do not have a physical location in the country. Pillar Two includes an agreement on international tax reform, including rules to ensure that large corporations pay a minimum rate of corporate income
tax. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. For Sysco, Pillar Two will be effective in fiscal year 2025.

The determination of our provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. Our provision for income taxes reflects income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Tax law changes, increases or decreases in permanent book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.