XML 23 R12.htm IDEA: XBRL DOCUMENT v3.25.3
Income Taxes
 6 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense was as follows:
Three Months Ended September 30, Six Months Ended September 30,
(Dollars in millions)2025202420252024
Income tax expense$232 $247 $452 $371 
Reported income tax rate16.6 %46.3 %18.5 %22.9 %
Fluctuations in the Company’s reported income tax rates were primarily due to changes in the mix of earnings among various taxing jurisdictions and discrete items recognized in the quarters.
During the three months ended September 30, 2025, the Company recognized a discrete tax benefit of $119 million related to the release of a valuation allowance in a foreign jurisdiction based on management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of September 30, 2025, the Company determined that there is sufficient positive evidence to conclude that it is more likely than not that these additional deferred tax assets will be realized and reduced the valuation allowance accordingly. During the six months ended September 30, 2025, the Company also recognized a net discrete tax benefit of $23 million primarily related to the tax impact of share based compensation.
During the three months ended September 30, 2024, the Company sold certain intellectual property between McKesson wholly-owned legal entities based in foreign tax jurisdictions. The transferor entity of the intellectual property was not subject to income tax on this transaction. The recipient entity of the intellectual property is entitled to amortize the fair value of the assets for tax purposes. As a result, a discrete tax benefit of $44 million was recognized in the second quarter of fiscal 2024.
During the three and six months ended September 30, 2024, the Company recorded non-cash pre-tax charges of $643 million to remeasure the Canadian retail disposal group to fair value less costs to sell. The Company’s reported income tax rates for the three and six months ended September 30, 2024 were unfavorably impacted by these charges given that no net tax benefit was recognized for these charges.
During the six months ended September 30, 2024, the Company also recognized discrete tax benefits of $58 million related to an election to change the tax status of a foreign affiliate, $38 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 $37 million related to interest expense accrued on unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions, and various foreign jurisdictions. As of September 30, 2025, the Company had $1.6 billion of unrecognized tax benefits, of which $1.4 billion would reduce income tax expense and the effective tax rate if recognized.