v3.23.2
Income Taxes
 12 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 19. 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.
Income before income tax expense was attributable to the following jurisdictions:
For the fiscal years ended June 30,
202320222021
(in millions)
U.S.$74 $194 $266 
Foreign256 618 184 
Income before income tax expense$330 $812 $450 
The significant components of the Company’s income tax expense were as follows:
For the fiscal years ended June 30,
202320222021
(in millions)
Current:
U.S.
Federal$1 $— $5 
State & Local15 9 9 
Foreign125 160 133 
Total current tax141 169 147 
Deferred:
U.S.
Federal(10)54 (30)
State & Local— 4 (1)
Foreign12 (175)(55)
Total deferred tax2 (117)(86)
Total income tax expense$143 $52 $61 
The reconciliation between the Company’s actual effective tax rate and the statutory U.S. Federal income tax rate was as follows:
For the fiscal years ended June 30,
202320222021
U.S. federal income tax rate21 %21 %21 %
State and local taxes, net4 1 2 
Effect of foreign operations (a)
15 7 12 
Change in valuation allowance (b)
1 (19)(16)
Non-deductible goodwill and asset impairments4 — 1 
Non-deductible compensation and benefits3 — 4 
Remeasurement of deferred tax assets (c)
— (2)(7)
R&D tax credits(3)(1)(2)
Impact of dispositions— (2)— 
Other(2)1 (1)
Effective tax rate43 %6 %14 %
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(a)The Company’s effective tax rate is impacted by the geographic mix of its pre-tax income. The Company’s foreign operations are located primarily in Australia and the United Kingdom (“U.K.”). Australia has a higher income tax rate than the U.S. and the U.K. has a lower tax rate than the U.S. through the fiscal year ended June 30, 2023.
(b)For the fiscal year ended June 30, 2022, the Company released valuation allowances of $156 million, including $149 million related to certain Foreign deferred tax assets. For the fiscal year ended June 30, 2021, the Company released $75 million of valuation allowances, including $64 million related to certain U.S. deferred tax assets.
(c)For the fiscal year ended June 30, 2022, the Company recorded a benefit of $18 million related to the remeasurement of its U.K. deferred tax assets. For the fiscal year ended June 30, 2021, the Company recorded a benefit of $34 million related to the remeasurement of its U.K. deferred tax assets which includes the enacted corporate income tax increase resulting from the Finance Act 2021.
The Company recognized deferred income taxes in the Balance Sheets as follows:
As of June 30,
20232022
(in millions)
Deferred income tax assets
$393 $422 
Deferred income tax liabilities
(163)(198)
Net deferred tax assets$230 $224 
The significant components of the Company’s deferred tax assets and liabilities were as follows:
As of June 30,
20232022
(in millions)
Deferred tax assets:
Accrued liabilities$150 $181 
Capital loss carryforwards1,163 1,135 
Net operating loss carryforwards360 408 
Business tax credits131 122 
Operating lease liabilities309 278 
Other138 116 
Total deferred tax assets2,251 2,240 
Deferred tax liabilities:
Asset basis difference and amortization(79)(163)
Operating lease right-of-use asset(287)(257)
Other(9)(8)
Total deferred tax liabilities(375)(428)
Net deferred tax asset before valuation allowance1,876 1,812 
Less: valuation allowance (See Note 22—Valuation and Qualifying Accounts)
(1,646)(1,588)
Net deferred tax assets$230 $224 
As of June 30, 2023, the Company had income tax net operating loss (“NOL”) carryforwards (gross, net of uncertain tax benefits) in various jurisdictions as follows:
JurisdictionExpirationAmount
(in millions)
U.S. Federal2024 to 2037$116 
U.S. FederalIndefinite333 
U.S. StatesVarious730 
AustraliaIndefinite319 
U.K.Indefinite28 
Other ForeignVarious568 
Utilization of the NOLs is dependent on generating sufficient taxable income from our operations in each of the respective jurisdictions to which the NOLs relate, while taking into account tax filing groups and limitations and/or restrictions on our ability to use them. Certain of our U.S. federal NOLs were acquired as part of the acquisitions of Move and Harlequin and are subject to limitations as promulgated under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Section 382 of the Code limits the amount of NOLs that we can use on an annual basis to offset consolidated U.S. taxable income. The NOLs are also subject to review by relevant tax authorities in the jurisdictions to which they relate.
The Company recorded a deferred tax asset of $360 million and $408 million associated with its NOLs (net of approximately $55 million and $68 million, respectively, of unrecognized tax benefits recorded against deferred tax assets) as of June 30, 2023 and 2022, respectively. Significant judgment is applied in assessing our ability to realize our NOLs. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets within the applicable expiration period.
On the basis of this evaluation, valuation allowances of $124 million and $122 million have been established to reduce the deferred tax asset associated with the Company’s NOLs to an amount that will more likely than not be realized as of June 30, 2023 and 2022, respectively. For the fiscal year ended June 30, 2022, the Company released valuation allowances related to Australian NOLs of $31 million that are more likely than not to be realized. For the fiscal year ended June 30, 2021, the Company released valuation allowances related to U.S. Federal NOLs of $64 million that are more likely than not to be realized.
As of June 30, 2023, the Company had approximately $2.6 billion and $1.6 billion of capital loss carryforwards in Australia and the U.K., respectively. Australia and U.K. capital loss carryforwards may be carried forward indefinitely. The capital loss carryforwards are also subject to review by relevant tax authorities in the jurisdictions to which they relate. Realization of our capital losses is dependent on generating capital gain taxable income and satisfying certain continuity of business requirements. The Company recorded a deferred tax asset of $1.2 billion and $1.1 billion as of June 30, 2023 and 2022 for these capital loss carryforwards. However, it is more likely than not that the Company will not generate capital gain income in the normal course of business in these jurisdictions. Accordingly, valuation allowances of $1.2 billion and $1.1 billion have been established to reduce the capital loss carryforward deferred tax asset to an amount that will more likely than not be realized as of June 30, 2023 and 2022, respectively.
As of June 30, 2023, the Company had approximately $90 million of U.S. federal tax credit carryforwards which includes $35 million of foreign tax credits and $55 million of general business credits, which begin to expire in 2026 and 2036, respectively.
As of June 30, 2023, the Company had approximately $32 million of non-U.S. tax credit carryforwards which expire in various amounts beginning in 2026 and $11 million of state tax credit carryforwards (net of U.S. federal benefit), which expire in various amounts beginning in 2024.
A valuation allowance of $30 million has been established to reduce the deferred tax asset associated with the Company’s U.S. federal tax credits, non-U.S. tax credits and state tax credit carryforwards to an amount that will more likely than not be realized as of June 30, 2023.
Uncertain Tax Positions
The following table sets forth the change in the Company’s unrecognized tax benefits, excluding interest and penalties:
For the fiscal years ended June 30,
202320222021
(in millions)
Balance, beginning of period$86 $69 $63 
Additions for prior year tax positions14 — — 
Additions for current year tax positions17 28 4 
Reduction for prior year tax positions— (1)(2)
Lapse of the statute of limitations(2)(3)(3)
Settlement—tax attributes(14)— — 
Impact of currency translations4 (7)7 
Balance, end of period$105 $86 $69 
The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense, which is consistent with the recognition in prior reporting periods. The Company recognized an expense related to interest and penalties of $1 million for each of the fiscal years ended June 30, 2023, 2022 and 2021. The Company recorded liabilities for accrued interest and penalties of approximately $5 million, $5 million and $4 million as of June 30, 2023, 2022 and 2021, respectively.
The Company’s tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. The Company is currently undergoing tax examinations in the U.S., various states and foreign jurisdictions. The Internal Revenue Service has commenced an audit for the fiscal year ended June 30, 2018 which is currently ongoing. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid. However, the Company may need to accrue additional income tax expense and our liability may need to be adjusted as new information becomes known and as these tax examinations continue to progress, or as settlements or litigations occur.
The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that could be audited by the respective taxing authorities.
JurisdictionFiscal Years Open to Examination
U.S. federal2018, 2020-2022
U.S. statesVarious
Australia2015-2022
U.K.2011-2022
It is reasonably possible that uncertain tax positions may increase or decrease in the next fiscal year, however, actual developments in this area could differ from those currently expected. As of June 30, 2023, approximately $53 million would affect the Company’s effective income tax rate, if and when recognized in future fiscal years. It is reasonably possible, the amount of uncertain tax liabilities which may be resolved within the next fiscal year is between the range of approximately nil and $25 million, a portion of which will affect our effective income tax rate, primarily as a result of the settlement of tax examinations and the lapsing of statutes of limitations.
Other
The Inflation Reduction Act ("IRA") was signed into law on August 16, 2022. The IRA implements a 15% corporate minimum tax on corporations with over $1 billion of financial statement income, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy. On December 27, 2022, the U.S. Treasury Department provided additional guidance on the corporate minimum tax and the excise tax on stock repurchases. The Company is not expected to be subject to the corporate minimum tax and it will be subject to the 1% excise tax on stock repurchases. The 1% stock repurchase excise tax is not expected to have a material impact on the Company’s results of operations.
The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting has agreed on a two-pillar approach to address tax challenges arising from the digitalization of the global economy by (1) allocating profits to market jurisdictions (“Pillar One”) and (2) ensuring multinational enterprises pay a minimum level of tax regardless of where the headquarters are located or the jurisdictions in which the company operates (“Pillar Two”). Pillar One targets multinational groups with global revenue exceeding 20 billion Euros and a profit-to-revenue ratio of more than 10%. Companies subject to Pillar One will be required to allocate profits and pay taxes to market jurisdictions. Based on the current proposed revenue and profit thresholds, the Company does not expect to be subject to tax changes associated with Pillar One. Pillar Two establishes a global minimum effective tax rate of 15% for multinational groups with annual global revenue exceeding 750 million Euros. On December 15, 2022, EU Member States unanimously adopted a directive implementing the global minimum tax rules of Pillar Two requiring members to enact the directive into their national laws which are expected to begin going into effect for tax years beginning on January 1, 2024 or later. We are currently evaluating the potential impact of the Pillar Two global minimum tax proposals on our consolidated financial statements and related disclosures.
Prior to the enactment of the Tax Act, the Company’s undistributed foreign earnings were considered permanently reinvested and as such, United States federal and state income taxes were not previously recorded on these earnings. As a result of the Tax Act, substantially all of the Company’s earnings in foreign subsidiaries generated prior to the enactment of the Tax Act were deemed to have been repatriated and taxed accordingly. As of June 30, 2023, the Company has approximately $800 million of undistributed foreign earnings that it intends to reinvest permanently. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated. The Company may repatriate future earnings of certain foreign subsidiaries in which case the Company may be required to accrue and pay additional taxes, including any applicable foreign withholding taxes and income taxes.
During the fiscal years ended June 30, 2023, 2022 and 2021, the Company paid gross income taxes of $150 million, $180 million and $176 million, respectively, and received income tax refunds of $13 million, $3 million and $14 million, respectively.