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Income Taxes | 9 Months Ended
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Mar. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 7. Income Taxes Fluctuations in our provision for income taxes as a percentage of pre-tax earnings/(loss) (“effective tax rate”) are due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items. Effective Tax Rate During the three and nine months ended March 31, 2023, the effective tax rate was 36.3 percent and 36.7 percent, respectively, and reflects any impact of the tax effects of the goodwill impairment charges recognized during the three and nine months ended March 31, 2023. During the three and nine months ended March 31, 2022, the effective tax rate was (916.5) percent and (44.4) percent, respectively, and reflects the impact of the tax effect of the goodwill impairment charges recognized during the three and nine months ended March 31, 2022. Tax Effects of Goodwill Impairment Charges During the nine months ended March 31, 2023, we recognized pre-tax goodwill impairment charges of $863 million related to the Medical Unit. The net tax benefit related to these charges is $68 million for fiscal 2023. Unless an item is considered discrete because it is unusual or infrequent, the tax impact of the item is included in our estimated annual effective tax rate. When items are recognized through our estimated annual effective tax rate, we apply our estimated annual effective tax rate to the earnings/(loss) before income taxes for the year-to-date period to compute our impact from income taxes for the current quarter and year-to-date period. The tax impacts of discrete items are recognized in their entirety in the period in which they occur. The tax effect of the goodwill impairment charges during the nine months ended March 31, 2023 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairments in prior fiscal years. The impact of the non-deductible goodwill increased the estimated annual effective tax rate for fiscal 2023. Applying the higher tax rate to the pre-tax income for the nine months ended March 31, 2023 resulted in recognizing an incremental interim tax expense of approximately $74 million, which impacted the provision for income taxes in the condensed consolidated statements of earnings/(loss) during the three months ended March 31, 2023 and prepaid expenses and other assets in the condensed consolidated balance sheet at March 31, 2023. The incremental interim tax benefit recognized during the nine months ended March 31, 2023 was $66 million and will reverse in the fourth quarter of fiscal 2023. Unrecognized Tax Benefits We had $1.1 billion and $943 million of unrecognized tax benefits, at March 31, 2023 and June 30, 2022, respectively. The March 31, 2023 and June 30, 2022 balances include $897 million and $858 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate. At March 31, 2023 and June 30, 2022, we had $61 million and $48 million, respectively, accrued for the payment of interest and penalties related to unrecognized tax benefits, which we recognize in the provision for income taxes in the condensed consolidated statements of earnings/(loss). 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 IRS and other 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 up to $125 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 2015 through the current fiscal year. We are a party to a tax matters agreement with CareFusion Corporation ("CareFusion"), a subsidiary of 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 $80 million and $75 million at March 31, 2023 and June 30, 2022, respectively, and is included in other assets in the condensed consolidated balance sheets.

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