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:
|
|
|
|
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| |
|
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:
|
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|
|
|
|
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|
|
|
|
|
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| |
|
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 |
)% |
|
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| (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:
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|
|
|
|
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|
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 |
|