Valuation allowance movements

  
FOX CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSThe reconciliation of income tax computed at the statutory rate to income tax expense was:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | For the years ended June 30, |
|  | 2022 |  | 2021 |  | 2020 |
| U.S. federal income tax rate | 21  | % |  | 21  | % |  | 21  | % |
| State and local taxes | 4  |  |  | 4  |  |  | 4  |  |
| Nondeductible compensation | 1  |  |  | 1  |  |  | 2  |  |
| Valuation allowance movements | —  |  |  | —  |  |  | 1  |  |
| Adjustments for tax matters, net | —  |  |  | (1) |  |  | (1) |  |
| Return to accrual(a) | 2  |  |  | —  |  |  | —  |  |
| Other | (1) |  |  | —  |  |  | —  |  |
| Effective tax rate | 27  | % |  | 25  | % |  | 27  | % |



|  |  |  |
| --- | --- | --- |
|  |  |  |
|  |



|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |
| (a) | Primarily attributable to a remeasurement of the Company's net deferred tax assets associated with changes in the mix of jurisdictional earnings. |

The following is a summary of the components of the deferred tax accounts:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | As of June 30, |
|  | 2022 |  | 2021 |
|  | (in millions)  |
| Deferred tax assets |  |  |  |
| Basis difference(a) | $ | 3,371  |  |  | $ | 3,676  |  |
| Operating lease liabilities | 123  |  |  | 121  |  |
| Pension benefit obligations | 34  |  |  | 64  |  |
| Equity-based compensation | 30  |  |  | 33  |  |
| Accrued liabilities | —  |  |  | 37  |  |
| Net operating loss carryforwards | 31  |  |  | 18  |  |
| Other | 104  |  |  | 117  |  |
| Total deferred tax assets | 3,693  |  |  | 4,066  |  |
| Deferred tax liabilities |  |  |  |
| Operating lease ROU assets | (116) |  |  | (114) |  |
| Accrued liabilities | (2) |  |  | —  |  |
| Sports rights contracts | (108) |  |  | (108) |  |
| Total deferred tax liabilities | (226) |  |  | (222) |  |
| Net deferred tax asset before valuation allowance | 3,467  |  |  | 3,844  |  |
| Less: valuation allowance | (34) |  |  | (24) |  |
| Total net deferred tax assets(b) | $ | 3,433  |  |  | $ | 3,820  |  |



|  |  |  |
| --- | --- | --- |
|  |  |  |
|  |



|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |
| (a) | As a result of the Separation and the Distribution, which was a taxable transaction for which the estimated tax liability of $5.8 billion was included in the Transaction Tax paid by the Company, FOX obtained a tax basis in its assets equal to their respective fair market values. This amount includes the additional estimated deferred tax asset recorded as a result of the increased tax basis (See Note 1—Description of Business and Basis of Presentation under the heading "Basis of Presentation"). |
| (b) | Includes a $7 million and $2 million deferred tax liability recorded in Other liabilities on the Consolidated Balance Sheet as of June 30, 2022 and 2021, respectively. |

As of June 30, 2022, the Company had $31 million of tax attributes from net operating loss carryforwards available to offset future taxable income. A substantial portion of these losses can be carried forward indefinitely.101
