Income Taxes

9 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recorded an income tax (benefit) provision of $(10,446) and $2,102 on a (loss) income before income taxes of $(5,290) and $6,241 for the third quarters ended March 31, 2023 and April 1, 2022, respectively. The Company recorded an income tax (benefit) provision of $(13,619) and $1,506 on a loss before income taxes of $33,718 and $4,134 for the nine months ended March 31, 2023 and April 1, 2022, respectively.

For the third quarter ended March 31, 2023, the Company calculated the U.S. income tax benefit using the discrete method which assumes the nine month period was the annual period as this was more appropriate given the facts and circumstances. The Company determined that the application of the estimated annual effective tax rate (“AETR”) method generally required by ASC 740 is impractical given that normal deviations in the projected close to break-even pre-tax net income (loss) could result in a disproportionate and unreliable effective tax rate under the AETR method. The tax benefit for the third quarter ended March 31, 2023 also includes a true-up to the prior quarters due to the change in methodology.

During the third quarter ended March 31, 2023, the Company concluded its income tax audit with the Internal Revenue Service for fiscal years 2016 through 2018 and recognized a tax benefit of $1,335 related to a release of income tax reserves for unrecognized income tax benefits. During the nine months ended March 31, 2023, the Company recognized a tax benefit of $3,683 related to a release of income tax reserves for unrecognized income tax benefits due to the expiration of the statute of limitations.

During the nine months ended March 31, 2023 and April 1, 2022, the Company recognized a tax provision of $1,655 and $906 related to stock compensation shortfalls, respectively.

The effective tax rate for the third quarter and nine months ended March 31, 2023 and April 1, 2022 differed from the federal statutory rate primarily due to federal and state research and development credits, non-deductible compensation and state taxes. The effective tax rate for the third quarter and nine months ended March 31, 2023 also differed from the federal statutory rate due to the release of income tax reserves for unrecognized income tax benefits.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 into law which contained provisions that include a 15% corporate minimum tax effective for taxable years beginning after December 31, 2022 and a 1% excise tax on certain stock buybacks after December 31, 2022. The Company expects the impact of this legislation to be immaterial.

Effective for tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act of 2017 requires companies to capitalize and amortize domestic research and development expenditures over five years for tax purposes, and foreign research and development expenditures over fifteen years for tax purposes.