Undistributed Earnings of Foreign Subsidiaries

  
impact of discrete items. The lower effective tax rate for the fiscal year ended June 30, 2022 is primarily due to (i) increased income tax benefit resulting from a relative increase in non-U.S. earnings that are subject to more favorable tax rates than in the U.S., and (ii) an increased U.S. foreign tax credit due to amended prior-year returns. The Company also recognized a net deferred benefit of $21 million related to recently enacted tax reform in Switzerland and related transition rules (collectively, “Swiss Tax Reform”) presented in the table above in two components, a gross $83 million deferred tax benefit partially offset by a $62 million valuation allowance charge. The net deferred benefit of $21 million is the best estimate of the deferred tax benefit arising from Swiss Tax Reform. Swiss Tax Reform benefits were partially offset by certain deemed income inclusions in the U.S.and a deferred income tax charge for establishing valuation allowances against the net deferred tax assets of certain Belgian operations. The income tax provision for the fiscal year ended June 30, 2021 was higher than the income tax provision for the fiscal year ended June 30, 2020 due to the sale of the Blow-Fill-Seal Business and an increase in state taxes, offset by an increase in foreign tax credits due to amended prior year returns, as well as a reduction in the foreign valuation allowance.  
 The Company intends to repatriate foreign earnings taxed in prior fiscal years as a result of the changes imposed by the 2017 U.S. Tax Cuts and Jobs Act. In addition to these foreign earnings previously taxed, as of June 30, 2022, for purposes of ASC 740-10-25-3, the Company had $241 million of undistributed earnings from non-U.S. subsidiaries that it intends to reinvest permanently in its non-U.S. operations. As these ASC 740-10-25-3 earnings are considered permanently reinvested, no tax provision has been accrued. It is not feasible to estimate the amount of tax that might be payable on the eventual remittance of such earnings.Deferred income taxes arise from temporary differences between the financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the Company's deferred income tax assets and liabilities are as follows at June 30, 2022 and 2021: 

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | Fiscal Year Ended   June 30, |
| (Dollars in millions) | 2022 |  | 2021 |
| Deferred income tax assets: |  |  |   |
| Accrued liabilities | $ | 33  |  |  | $ | 43  |  |
| Equity compensation | 14  |  |  | 15  |  |
| Loss and tax credit carryforwards | 225  |  |  | 187  |  |
| Foreign currency | 19  |  |  | 12  |  |
| Pension | 17  |  |  | 24  |  |
| Interest-related | 14  |  |  | 14  |  |
| Deferred revenue | 1  |  |  | 3  |  |
|  |  |  |  |
| Lease liabilities | 39  |  |  | 35  |  |
| Euro-denominated debt | —  |  |  | 23  |  |
| Other | 2  |  |  | —  |  |
| Total deferred income tax assets | $ | 364  |  |  | $ | 356  |  |
| Valuation allowance | (149) |  |  | (65) |  |
| Net deferred income tax assets | $ | 215  |  |  | $ | 291  |  |
|  |  |  |  |
|  |  |  |  |
|  | Fiscal Year Ended   June 30, |
| (Dollars in millions) | 2022 |  | 2021 |
| Deferred income tax liabilities: |  |  |  |
|  |  |  |  |
|  |  |  |  |
| Euro-denominated debt | $ | (6) |  |  | $ | —  |  |
| Property-related | (227) |  |  | (171) |  |
| Goodwill and other intangibles | (113) |  |  | (194) |  |
| Right-of-use assets | (21) |  |  | (18) |  |
| Other | (1) |  |  | (6) |  |
|  |  |  |  |
| Total deferred income tax liabilities | $ | (368) |  |  | $ | (389) |  |
|  |  |  |  |
| Net deferred tax liability | $ | (153) |  |  | $ | (98) |  |

96
