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Income Taxes | 9 Months Ended
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Mar. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 7. Income Taxes Fluctuations in our provision for/(benefit from) income taxes as a percentage of pretax earnings (“effective tax rate”) are generally due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items. U.S. Tax Cuts and Jobs Act On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that affected fiscal 2018 and will incrementally affect our fiscal year 2019 financial results in several ways. First, the U.S. statutory tax rate in fiscal 2019 is reduced to 21 percent. Second, the Tax Act established new tax provisions that affected us beginning July 1, 2018 including, (1) eliminating the U.S. manufacturing deduction; (2) establishing new limitations on deductible interest expense and certain executive compensation; (3) eliminating the corporate alternative minimum tax; (4) creating the base erosion anti-abuse tax; (5) creating a new provision designed to tax global intangible low-tax income (“GILTI”) and allow for a deduction related to foreign derived intangible income ("FDII"); (6) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; and (7) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. Regarding the new GILTI tax rules, we elected to treat taxes due on future GILTI inclusions in U.S. taxable income as a current period expense when incurred. In accordance with SAB 118, we finalized our provisional estimates related to transitional tax benefits (i.e., remeasurement of deferred tax assets and liabilities and the repatriation tax on undistributed foreign earnings) which did not have a significant impact on tax expense during the nine months ended March 31, 2019. Future adjustments to the financial statements may be necessary as final tax regulations, including issued and pending regulatory changes, the impact of which is or will be assessed as final regulations are issued. Effective Tax Rate During the three months ended March 31, 2019 and 2018, the effective tax rate was 20.0 percent and 45.1 percent, respectively. The change in the effective tax rates for the t hree months ended March 31, 2019 compared to the prior period was due to discrete tax items, a lower federal statutory tax rate applied to our U.S. pre-tax earnings as a result of the Tax Act and the prior year unfavorable impact from changes in jurisdictional mix. The three months ended March 31, 2019 benefited from net favorable discrete items of $12 million and the three months ended March 31, 2018 were adversely affected by net unfavorable discrete items of $18 million. During the nine months ended March 31, 2019 and 2018, the effective tax rate was 22.6 percent and (48.6) percent, respectively. The change in the effective tax rates for the nine months ended March 31, 2019 c ompared to the prior period was primarily due to the prior year transitional tax benefits from the enactment of the Tax Act. The nine months ended March 31, 2019 also included net discrete benefits of $50 million, primarily related to international legal entity changes, and the nine months ended March 31, 2018 were adversely affected by net unfavorable discrete items of $12 million. The transitional tax benefits from the Tax Act during the three and nine months ended March 31, 2018 included a provisional net tax benefit of $18 million and $952 million, respectively, related to the remeasurement of our deferred tax assets and liabilities to the new federal statutory rate and the nine months ended March 31, 2018 a provisional tax expense of $41 million for the one-time repatriation tax applied to our undistributed foreign earnings. Our effective tax rates for the three and nine months ended March 31, 2018 also included $57 million of tax expense recognized in connection with the sale of our China distribution business. Unrecognized Tax Benefits At March 31, 2019 and June 30, 2018, we had $436 million and $423 million of unrecognized tax benefits, respectively. The March 31, 2019 and June 30, 2018 balances include $275 million and $262 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate. At March 31, 2019 and June 30, 2018, we had $116 million and $110 million, respectively, accrued for the payment of interest and penalties related to unrecognized tax benefits, which we recognize in the provision for/(benefit from) income taxes in the condensed consolidated statements of earnings. These balances are gross amounts before any tax benefits and are included in deferred income taxes and other liabilities in the condensed consolidated balance sheets. It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next 12 months due to activities of the U.S. Internal Revenue Service ("IRS") or other taxing authorities, possible settlement of audit issues, reassessment of existing unrecognized tax benefits or the expiration of statutes of limitations. We estimate that the range of the possible change in unrecognized tax benefits within the next 12 months is between zero and a net decrease of $20 million, exclusive of penalties and interest. Other Tax Matters We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With few exceptions, we are subject to audit by taxing authorities for fiscal years 2008 through the current fiscal year. We are a party to a tax matters agreement with CareFusion Corporation ("CareFusion"), which has been acquired by Becton, Dickinson and Company. Under the tax matters agreement, CareFusion is obligated to indemnify us for certain tax exposures and transaction taxes prior to our fiscal 2010 spin-off of CareFusion. The indemnification receivable was $159 million and $151 million at March 31, 2019 and June 30, 2018, respectively, and is included in other assets in the condensed consolidated balance sheets. As a result of the acquisition of the Patient Recovery Business, Medtronic plc is obligated to indemnify us for certain tax exposures and transaction taxes related to periods prior to the acquisition under the purchase agreement. The indemnification receivable was $24 million and $21 million at March 31, 2019 and June 30, 2018, respectively, and is included in other assets in the condensed consolidated balance sheet.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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