Operating Loss Carryforwards, Indefinite Life

  
Deferred tax assets and liabilities in the preceding table are in the following captions in the consolidated balance sheets at June 30, 2022 and 2021:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | Fiscal Year Ended   June 30, |
| (Dollars in millions) | 2022 |  | 2021 |
| Non-current deferred tax asset | $ | 49  |  |  | $ | 66  |  |
| Non-current deferred tax liability | (202) |  |  | (164) |  |
| Net deferred tax liability | $ | (153) |  |  | $ | (98) |  |

At June 30, 2022, the Company had federal net operating loss (“NOL”) carryforwards of $532 million, $211 million of which are subject to limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The majority of the $211 million federal NOL carryforwards subject to Section 382 of the Internal Revenue Code are attributed to the Company's acquisitions of Pharmatek Laboratories, Inc., Juniper Pharmaceuticals, Inc., Paragon Bioservices, Inc., and MastherCell Global Inc. (“MaSTherCell”). As of June 30, 2022, $461 million of the Company's federal NOL carryforwards have an indefinite life and the remaining NOL carryforwards will expire in fiscal years 2023 through 2037.At June 30, 2022, the Company had state tax NOL carryforwards of $431 million. Substantially all state NOL carryforwards have a twenty-year carryforward period. At June 30, 2022, the Company had non-U.S. tax NOL carryforwards of $240 million, a majority of which are available for at least three years or have an indefinite carryforward period.The Company had valuation allowances of $149 million and $65 million as of June 30, 2022 and 2021, respectively, against its deferred tax assets. The Company considered all available evidence, both positive and negative, in assessing the need for a valuation allowance against tax assets. Four possible sources of taxable income were evaluated when assessing the realizability of deferred tax assets:•carrybacks of existing NOLs (if and to the extent permitted under the tax law);•future reversals of existing taxable temporary differences; •tax planning strategies; and •future taxable income exclusive of reversing temporary differences and carryforwards. While the valuation allowance related to certain U.S. combined states was released during the fiscal year ended June 30, 2019, there remained as of June 30, 2022 a valuation allowance for the NOLs and deductible temporary differences in the remaining combined and separate states of $37 million. The state valuation allowance as of June 30, 2022 is due to the Company’s history of tax losses and anticipated loss utilization rates in separate filing status states as well as the difference in the rules related to allocated and apportioned income for separate filing status states versus combined filing status states.  
The Company considered the need to maintain a valuation allowance on deferred tax assets based on management’s assessment of whether it is more likely than not that the Company would realize the value of its deferred tax assets based on future reversals of existing taxable temporary differences and the ability to generate sufficient taxable income within the carryforward period available under the applicable tax laws. During the fiscal year ended June 30, 2022, the Company established valuation allowances on NOLs and temporary differences related to certain Belgian operations in the aggregate amount of $26 million. In addition, the Company established valuation allowances on temporary differences related to intangibles in Switzerland in the amount of $62 million.  
In the normal course of business, the Company's income taxes are subject to audits by federal, state, and foreign tax authorities, some of which are ongoing and may result in proposed assessments. Germany and the U.K. are among the jurisdictions where the Company has substantial tax positions. The Company is no longer subject to examinations by the relevant tax authorities for years prior to fiscal 2009. The Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental. The Company assesses its income tax positions and records benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions for which it is more likely than not that a tax benefit will be sustained, the Company records the amount that has a greater than 50% likelihood of being realized upon resolution with the taxing authority that has full knowledge of all relevant information based on the technical merit. Interest and penalties are accrued, where applicable.97
