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Income Taxes
 9 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense was as follows:
Three Months Ended December 31, Nine Months Ended December 31,
(Dollars in millions)2024202320242023
Income tax expense (benefit)$298 $(18)$669 $289 
Reported income tax rate24.3 %(2.9)%23.5 %11.0 %
Fluctuations in the Company’s reported income tax rates were primarily due to non-cash charges related to remeasuring the value of its Canadian retail disposal group to fair value less costs to sell, changes in the mix of earnings between various taxing jurisdictions and discrete items recognized in the quarters.
During the three and nine months ended December 31, 2024, the Company recorded non-cash pre-tax charges of $23 million and $666 million respectively, to remeasure the Canadian retail 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 nine months ended December 31, 2024 were unfavorably impacted by these charges given that no net tax benefit was recognized for these charges.
During the nine months ended December 31, 2024, the Company recognized discrete tax benefits of $44 million related to the sale of certain intellectual property between McKesson wholly-owned legal entities based in foreign tax jurisdictions, $58 million related to an election to change the tax status of a foreign affiliate, $41 million related to the tax impact of share-based compensation, and $47 million related to the reduction in unrecognized tax benefits due to a change in case law, partially offset by a discrete tax expense of $56 million related to interest expense accrued on unrecognized tax benefits.
During the three and nine months ended December 31, 2023, the Company recognized a net discrete tax benefit of $141 million, primarily related to the release of a valuation allowance based on management’s reassessment of its deferred tax assets that were more likely than not to be realized. During the nine months ended December 31, 2023, the Company recognized a net discrete tax benefit of $147 million related to the repatriation of certain intellectual property between McKesson’s wholly-owned legal entities based in different tax jurisdictions.
As of December 31, 2024, the Company had $1.4 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, the Company does not anticipate any material reduction in its unrecognized tax benefits 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.
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and various foreign jurisdictions. The Company is generally subject to audit by taxing authorities in various U.S. states and in foreign jurisdictions for fiscal years 2016 through the current fiscal year.