Software & IT Services: Income tax disclosures (ASU 2023-09)

We adopted Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) prospectively. The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our effective rate for the year ended June 30, 2026, pursuant to the requirements of ASU 2023-09, were as follows:

(In millions, except percentages)
Year Ended June 30,	2026
Federal statutory tax rate	34,846	21.0 %
Effect of:
State and local income tax, net of federal income tax effect (a)	2,573	1.6 %
Foreign tax effects:
Ireland:
Statutory tax rate difference	( 4,301	( 2.6 )%
Other	809	0.5 %
Other foreign jurisdictions (b)	3,248	2.0 %
Effect of cross-border tax laws:
Global intangible low-taxed income (GILTI) (c)	5,068	3.1 %
Foreign-derived intangible income deduction	( 603	( 0.4 )%
Other	799	0.5 %
Tax credits:
Research and development credit	( 1,453	( 0.9 )%
Foreign tax credits	( 9,151	( 5.5 )%
Other	( 14	( 0.0 )%
Changes in unrecognized tax benefits (d)	1,094	0.7 %
Other reconciling items, net	( 730	( 0.6 )%
Effective rate	32,185	19.4 %

In fiscal year 2026, state and local income taxes in California, Illinois, Minnesota, New Jersey, New York, and New York City made up the majority (greater than 50%) of the tax effect in this category.

Under ASU 2023-09, Foreign tax effects include foreign withholding taxes while the related foreign tax credits are included in the Tax credits category. Prior to adoption of ASU 2023-09, foreign withholding taxes were presented net of foreign tax credits.

Under ASU 2023-09, we elected to present the effect of cross-border tax laws gross and present the foreign tax credits related to GILTI within the Tax credits category.

Includes changes in unrecognized tax benefits on an aggregated basis for all jurisdictions, including interest and penalties.

As previously disclosed for the years ended June 30, 2025 and 2024, prior to the adoption of ASU 2023-09, the items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our effective rate were as follows: