Income Taxes (Tables)

12 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Components of the provisional amounts recognized

The components of the provisional amounts recognized as part of the Tax Act are as follows:

	For the fiscal year  ended June 30, 2018
	(in millions)
Re-measurement of U.S. deferred tax balances	$	141
Valuation allowance recorded due to impact of GILTI and BEAT		64
Transition tax		26
Other		6
Income tax expense	$	237

Schedule of (Loss) Income from Continuing Operations Before Income Tax Expense (Benefit) Attributable to Jurisdictions

(Loss) income from continuing operations before income tax expense (benefit) was attributable to the following jurisdictions:

	For the fiscal years ended June 30,
	2018			2017			2016
	(in millions)
U.S.	$	(55	)	$	84		$	(125	)
Foreign		(1,034	)		(699	)		306
(Loss) income from continuing operations before income tax expense (benefit)	$	(1,089	)	$	(615	)	$	181

Schedule of Components of Income Tax Expense (Benefit)

The significant components of the Company’s income tax expense (benefit) were as follows:

	For the fiscal years ended June 30,
	2018			2017			2016
	(in millions)
Current:
U.S.
Federal	$	4		$	1		$	15
State & Local		8			4			5
Foreign		107			118			102
Total current tax		119			123			122
Deferred:
U.S.
Federal		269			57			(71	)
State & Local		(9	)		(1	)		(106	)
Foreign		(24	)		(151	)		1
Total deferred tax		236			(95	)		(176	)
Total income tax expense (benefit)(a)	$	355		$	28		$	(54	)

^(a)  The Company recognized a tax benefit of approximately $144 million upon reclassification of the Digital Education segment to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal year 2016. In addition, a tax benefit of $30 million related to the operations of the Digital Education segment was recorded to discontinued operations in (Loss) income from discontinued operations, net of tax, in the Statement of Operations in fiscal year 2016. The tax expense (benefit) shown above excludes the tax benefit of the Company’s digital education business in fiscal year 2016.

Effective Income Tax Rate Reconciliation

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,
	2018			2017			2016
U.S. federal income tax rate(a)		28	%		35	%		35	%
State and local taxes, net		(1	)		—			(8	)
Effect of foreign operations(b)		(2	)		(17	)		(1	)
Change in valuation allowance(c)		1			(7	)		(62	)
Non-deductible goodwill and asset impairments(d)		(32	)		(7	)		—
Impact of the Tax Act(e)		(22	)		—			—
Write-off of channel distribution agreement(f)		(9	)		—			—
Income tax audit settlements(g)		5			(10	)		—
Non-deductible compensation and benefits		(1	)		(1	)		3
R&D credits		—			1			(2	)
Other, net		—			1			5
Effective tax rate(h)		(33	)%		(5	)%		(30	)%

^(a)   As the Company has a June 30 fiscal year-end, the impact of the lower tax rate from the Tax Act will be phased in resulting in a U.S. statutory federal tax rate of approximately 28% for the fiscal year ended June 30, 2018 and a 21% U.S. statutory federal tax rate for fiscal years thereafter.

^(b)  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.”) which prior to fiscal year ended June 30, 2018 had lower income tax rates than the U.S.

^(c)  For the fiscal year ended June 30, 2017, valuation allowance increased by $40 million related to foreign net operating losses, which more likely than not will not be utilized.

For the fiscal year ended June 30, 2016, included in the change in valuation allowance is a tax benefit of $106 million related to the release of previously established valuation allowances related to certain U.S. federal NOLs and state deferred tax assets. This benefit was recognized in conjunction with management’s plan to dispose of the Company’s digital education business during fiscal 2016, as the Company now expects to generate sufficient U.S. taxable income to utilize these deferred tax assets prior to expiration.

^(d)  For the fiscal year ended June 30, 2018, the Company recorded non-cash charges of $218 million related to the impairment of goodwill and a write-down of assets and investments of approximately $1.1 billion, which reduced the Company’s tax benefit by $54 million and $301 million, respectively. These impairments and write-downs have an impact on our effective tax rate to the extent a tax benefit is not recorded.

For the fiscal year ended June 30, 2017, the Company recorded non-cash charges of $48 million related to the impairment of goodwill, which was non-deductible, and a write-down of $360 million on U.K. fixed assets, a portion of which were non-deductible, which reduced the Company’s tax benefit by $12 million and $29 million, respectively. These impairments and write-downs have an impact on our effective tax rate to the extent a tax benefit is not recorded.

^(e) As a result of the Tax Act, the Company recognized a net provisional income tax expense of $237 million primarily related to the re-measurement of U.S. deferred tax balances for the reduction in tax rate, valuation allowances recorded on certain deferred tax assets, and the liability for the transition tax.

^(f)  Represents the tax effect of the write-off of the FOX SPORTS Australia channel distribution agreement intangible asset as a result of the Transaction as well as other costs directly attributable to the Transaction.

^(g)  In the fiscal year ended June 30, 2018, certain pre-Separation tax matters were effectively settled with the Internal Revenue Service. As a result of the settlement, the Company recorded a net income tax benefit of $49 million, comprised of a current tax benefit of $2 million and a deferred tax benefit of $47 million.

In the fiscal year ended June 30, 2017, the Company reached an agreement with a foreign tax authority to settle certain tax issues related to fiscal years 2010 through 2015. As a result of the settlement, the Company recorded net income tax expense of $63 million. See “Uncertain Tax Positions” below.

^(h)  For the fiscal years ended June 30, 2018 and June 30, 2017, the effective tax rates of (33)% and (5)%, respectively, represents income tax expense when compared to consolidated pre-tax book loss. For the fiscal year ended June 30, 2016, the effective tax rate of (30)% represents income tax benefit when compared to consolidated pre-tax book income.

Summary of Recognized Deferred Income Taxes in Balance Sheets

The Company recognized deferred income taxes in the Balance Sheets at June 30, 2018 and 2017, respectively, as follows:

	As of June 30,
	2018			2017
	(in millions)
Deferred income tax assets	$	279		$	525
Deferred income tax liabilities		(389	)		(61	)
Net deferred tax (liabilities) assets	$	(110	)	$	464

Schedule of Components of Deferred Tax Assets and Liabilities

The significant components of the Company’s deferred tax assets and liabilities were as follows:

	As of June 30,
	2018			2017
	(in millions)
Deferred tax assets:
Accrued liabilities	$	95		$	80
Capital loss carryforwards		889			904
Retirement benefit obligations		38			101
Net operating loss carryforwards		348			473
Business tax credits		62			69
Other		294			284
Total deferred tax assets		1,726			1,911
Deferred tax liabilities:
Asset basis difference and amortization		(362	)		(204	)
Other		(89	)		(56	)
Total deferred tax liabilities		(451	)		(260	)
Net deferred tax asset before valuation allowance		1,275			1,651
Less: valuation allowance (See Note 22—Valuation and Qualifying Accounts)		(1,385	)		(1,187	)
Net deferred tax (liabilities) assets	$	(110	)	$	464

Schedule of Income Tax Net Operating Loss Carryforwards (NOLs) (Gross, Net Uncertain Tax Benefits)

As of June 30, 2018, the Company had income tax NOL Carryforwards (gross, net of uncertain tax benefits), in various jurisdictions as follows:

Jurisdiction	Expiration	Amount (in  millions)
U.S. Federal	2021 to 2037	$	635
U.S. States	Various		455
Australia	Indefinite		304
U.K.	Indefinite		4
Other Foreign	Various		423

Change in Unrecognized Tax Benefits, Excluding Interest and Penalties

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,
	2018			2017			2016
	(in millions)
Balance, beginning of period	$	64		$	86		$	129
Additions for prior year tax positions		2			107			6
Additions for current year tax positions		3			5			4
Reduction for prior year tax positions		(4	)		(9	)		(40	)
Lapse of the statute of limitations		(3	)		(8	)		(2	)
Settlement—cash		—			(21	)		(2	)
Settlement—tax attributes		(2	)		(94	)		—
Impact of currency translations		2			(2	)		(9	)
Balance, end of period	$	62		$	64		$	86

Summary of Major Tax Jurisdictions and Fiscal Years Open to Examination

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.

Jurisdiction	Fiscal Years Open to Examination
U.S. federal	2014-2017
U.S. state	Various
Australia	2014-2017
U.K.	2011-2017