NOTE 17. INCOME TAXES
Income from continuing operations before income tax expense was attributable to the following jurisdictions:
|
|
|
For the years ended June 30, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(in millions) |
|
|||||||||
|
U.S. (including exports) |
|
$ |
4,198 |
|
|
$ |
3,767 |
|
|
$ |
9,953 |
|
|
Foreign |
|
|
491 |
|
|
|
387 |
|
|
|
(106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense |
|
$ |
4,689 |
|
|
$ |
4,154 |
|
|
$ |
9,847 |
|
Significant components of the Company’s provision for income taxes from continuing operations were as follows:
|
|
|
For the years ended June 30, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(in millions) |
|
|||||||||
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
826 |
|
|
$ |
466 |
|
|
$ |
891 |
|
|
State & local |
|
|
65 |
|
|
|
99 |
|
|
|
88 |
|
|
Foreign |
|
|
439 |
|
|
|
99 |
|
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current |
|
|
1,330 |
|
|
|
664 |
|
|
|
1,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred and other |
|
|
89 |
|
|
|
466 |
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes from continuing operations |
|
$ |
1,419 |
|
|
$ |
1,130 |
|
|
$ |
1,243 |
|
The reconciliation of income tax attributable to continuing operations computed at the statutory rate to income tax expense was:
|
|
|
For the years ended June 30, |
|||||||||||||
|
|
|
2017 |
|
2016 |
|
2015 |
|||||||||
|
U.S. federal income tax rate |
|
|
35 |
|
% |
|
|
35 |
|
% |
|
|
35 |
|
% |
|
State and local taxes |
|
|
1 |
|
|
|
|
- |
|
|
|
|
1 |
|
|
|
Effect of foreign operations |
|
|
(2 |
) |
|
|
|
(3 |
) |
|
|
|
(2 |
) |
|
|
Adjustments for tax matters, net(a) |
|
|
- |
|
|
|
|
1 |
|
|
|
|
2 |
|
|
|
Valuation allowance movements |
|
|
1 |
|
|
|
|
2 |
|
|
|
|
(20 |
) |
|
|
Nontaxable income attributable to noncontrolling interests |
|
|
(2 |
) |
|
|
|
(2 |
) |
|
|
|
(1 |
) |
|
|
Domestic production activities deduction |
|
|
(3 |
) |
|
|
|
(2 |
) |
|
|
|
(1 |
) |
|
|
Other(b) |
|
|
- |
|
|
|
|
(4 |
) |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate for income from continuing operations |
|
|
30 |
|
% |
|
|
27 |
|
% |
|
|
13 |
|
% |
|
(a) |
In fiscal 2016, increases in the net provision for uncertain tax positions were substantially offset by the final settlement of a foreign matter. |
|
(b) |
Fiscal 2016 reflects increased tax amortization deductions for certain film and television properties as a result of a ruling that was received by the Company. |
The following is a summary of the components of the deferred tax accounts:
|
|
|
As of June 30, |
|
|||||
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(in millions) |
|
|||||
|
Deferred tax assets |
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
437 |
|
|
$ |
432 |
|
|
Capital loss carryforwards |
|
|
36 |
|
|
|
35 |
|
|
Foreign tax credit carryforwards |
|
|
132 |
|
|
|
- |
|
|
Accrued liabilities |
|
|
741 |
|
|
|
755 |
|
|
Other |
|
|
586 |
|
|
|
259 |
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
1,932 |
|
|
|
1,481 |
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
Basis difference and amortization |
|
|
(2,333 |
) |
|
|
(2,295 |
) |
|
Revenue recognition |
|
|
(553 |
) |
|
|
(504 |
) |
|
Sports rights contracts |
|
|
(917 |
) |
|
|
(717 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
(3,803 |
) |
|
|
(3,516 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability before valuation allowance |
|
|
(1,871 |
) |
|
|
(2,035 |
) |
|
Less: valuation allowance |
|
|
(714 |
) |
|
|
(575 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax liabilities |
|
$ |
(2,585 |
) |
|
$ |
(2,610 |
) |
The Company had non-current deferred tax assets of $197 million and $278 million as of June 30, 2017 and 2016, respectively. The Company also had non-current deferred tax liabilities of $2,782 million and $2,888 million as of June 30, 2017 and 2016, respectively.
As of June 30, 2017, the Company had $437 million of tax attributes from net operating loss carryforwards available to offset future taxable income. A substantial portion of these losses expire through 2024.
As of June 30, 2017, the Company had $132 million of foreign tax credit carryforwards available to offset certain future income tax expense. The Company has no valuation allowance associated with this tax asset as the Company has determined that it is more likely than not that the Company will utilize these foreign tax credit carryforwards prior to their expiration.
The increase in the valuation allowance to $714 million as of June 30, 2017 was primarily due to decreases in the basis of certain investments and additional foreign losses for which no benefit can be taken.
The following table sets forth the change in the uncertain tax positions, excluding interest and penalties:
|
|
|
For the years ended June 30, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(in millions) |
|
|||||||||
|
Balance, beginning of year |
|
$ |
674 |
|
|
$ |
361 |
|
|
$ |
144 |
|
|
Additions for prior year tax positions |
|
|
3 |
|
|
|
295 |
|
|
|
46 |
|
|
Additions for current year tax positions |
|
|
26 |
|
|
|
78 |
|
|
|
171 |
|
|
Reduction for prior year tax positions |
|
|
(124 |
) |
|
|
(60 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year |
|
$ |
579 |
|
|
$ |
674 |
|
|
$ |
361 |
|
The Company recognizes interest and penalty charges related to uncertain tax positions as income tax expense. The Company recorded liabilities for accrued interest of $74 million and $72 million as of June 30, 2017 and 2016, respectively, and the amounts of interest income/expense recorded in each of the three fiscal years 2017, 2016 and 2015 were not material.
The Company is subject to tax in various domestic and international jurisdictions and, as a matter of ordinary course, the Company is regularly audited by federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not anticipate that the resolution of these pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity. The additions to the balance of uncertain tax positions in fiscal 2017 is primarily attributable to foreign and state matters. During fiscal 2017, the reduction for prior year tax positions results from a settlement of audits. The U.S. Internal Revenue Service is currently examining fiscal years 2009 through 2013. In addition, the Company’s income tax returns for fiscal years 2010 through 2017 are subject to examination in various foreign jurisdictions. The Company does not expect significant changes to these positions over the next 12 months. As of June 30, 2017 and 2016, $505 million and $605 million, respectively, would affect the Company’s effective income tax rate, if the Company’s position with respect to the uncertainties is sustained.
The Company has not provided U.S. deferred income taxes and foreign withholding taxes on outside basis differentials including undistributed earnings attributable to certain foreign subsidiaries. It is management’s intention to reinvest in these subsidiaries indefinitely and the Company’s long term domestic liquidity needs do not consider repatriation of the undistributed earnings of these subsidiaries. The calculation of the unrecognized deferred tax liability for temporary differences related to these outside basis differentials is not practicable. Undistributed earnings of foreign subsidiaries of the Company considered to be indefinitely reinvested amounted to approximately $895 million as of June 30, 2017.