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Income Taxes
 12 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes and income tax (benefit) provision were as follows:
Fiscal Years
202320222021
(Loss) income before income taxes:
United States$(42,864)$24,286 $85,101 
Foreign(5,678)(5,891)(7,928)
$(48,542)$18,395 $77,173 
Tax (benefit) provision:
Federal:
Current$33,898 $3,857 $12,157 
Deferred(54,010)(230)(995)
(20,112)3,627 11,162 
State:
Current10,054 3,626 6,271 
Deferred(10,200)(2,721)(2,689)
(146)905 3,582 
Foreign:
Current104 2,535 435 
Deferred(53)53 (50)
51 2,588 385 
$(20,207)$7,120 $15,129 
The following is the reconciliation between the statutory Federal income tax rate and the Company’s effective income tax rate:
Fiscal Years
202320222021
Tax provision (benefit) at federal statutory rates(21.0)%21.0 %21.0 %
State income tax, net of federal tax benefit(5.4)8.1 6.7 
Research and development tax credits(15.1)(39.5)(10.9)
Provision to return(0.7)10.3 (1.3)
Excess tax (benefit) provision related to stock compensation2.6 5.3 (3.7)
Foreign income tax rate differential0.2 2.3 0.9 
Non-deductible compensation1.0 20.9 3.6 
Acquisition costs— 1.2 0.4 
Reserves for unrecognized income tax benefits(6.9)5.4 1.3 
Valuation allowance3.8 4.3 1.9 
Foreign derived intangible income(1.4)(1.6)(0.4)
Meals and entertainment0.6 0.8 0.1 
Other0.7 0.2 — 
(41.6)%38.7 %19.6 %
The effective tax rate for fiscal 2023 differed from the Federal statutory rate primarily due to Federal and state research and development tax credits, releases to reserves for unrecognized income tax benefits and state taxes, partially offset by valuation allowances recorded and excess tax provisions related to stock compensation.
The effective tax rate for fiscal 2022 differed from the Federal statutory rate primarily due to additional tax provisions for non-deductible compensation, provision to return adjustments, state taxes and excess tax provisions related to stock compensation, partially offset by benefits related to research and development tax credits.
The effective tax rate for fiscal 2021 differed from the Federal statutory rate primarily due to benefits related to research and development tax credits and excess tax benefits related to stock compensation, partially offset by additional tax provisions related to state taxes and non-deductible compensation.
During fiscal 2023, 2022 and 2021 the Company recognized a tax provision (benefit) of $1,244, $977 and $(2,831) related to stock compensation, respectively.
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. We expect 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 ("TCJA") 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. The cash outflow from this provision was $26,400 in fiscal 2023.
The components of the Company’s net deferred tax assets (liabilities) were as follows:
As of
June 30, 2023July 1, 2022
Deferred tax assets:
Inventory valuation and receivable allowances$18,095 $17,248 
Accrued compensation3,127 5,970 
Stock compensation5,149 6,154 
Federal and state tax credit carryforwards14,287 20,294 
Other accruals2,705 1,503 
Research and development expenditures63,114 — 
Deferred compensation930 930 
Federal and state net operating loss carryforward

774 5,275 
Foreign net operating loss carryforward3,166 1,859 
Operating lease liabilities19,968 21,988 
Deferred revenue1,260 743 
Other1,065 307 
133,640 82,271 
Valuation allowance(14,785)(15,349)
Total deferred tax assets118,855 66,922 
Deferred tax liabilities:
Prepaid expenses(1,710)(1,815)
Property and equipment(15,798)(19,766)
Intangible assets(54,550)(59,628)
Operating lease right-of-use assets, net(17,077)(17,985)
Gain on interest rate swap(2,400)— 
Other(221)(126)
Total deferred tax liabilities(91,756)(99,320)
Net deferred tax assets (liabilities)$27,099 $(32,398)
At June 30, 2023, the Company evaluated the need for a valuation allowance on deferred tax assets. In assessing whether the deferred tax assets are realizable, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the Company's past and recent operating performance and results, future taxable income including the reversal of existing deferred tax liabilities, and tax planning strategies. The Company continues to conclude that its net deferred tax assets in Switzerland are not more likely than not to be realized, and as such, continues to maintain a valuation allowance on such net deferred tax assets. The Company also continues to conclude that certain state research and development tax credits carryforwards are not more likely than not to be realized, and as such, continues to maintain a valuation allowance on these carryforwards. The Company
continues to conclude that all other deferred tax assets are more likely than not to be realized. Any future changes in the valuation allowance will impact the Company's income tax provision.
Fiscal 2023 includes the impact of the TCJA, which 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.
The Company has state research and development tax credit carryforwards of $11,697, which will expire starting in fiscal year 2024 through fiscal year 2038.
The Company has acquired Federal net operating loss carryforwards of $188, which have an unlimited carryforward period. The Company has acquired state net operating loss carryforwards of $11,170, which will expire starting in fiscal year 2040. The Company has foreign net operating loss carryforwards of $21,551, which will expire starting in fiscal year 2028 through fiscal year 2043. The Company maintains a valuation allowance on the majority of the foreign net operating loss carryforward.
The Company is subject to taxation in the U.S. (Federal and state) and various foreign jurisdictions that it operates in. The Company has established income tax reserves for potential additional income taxes based upon management’s assessment, including recognition and measurement. All income tax reserves are analyzed quarterly, and adjustments are made as events occur and warrant modification.
The changes in the Company’s income tax reserves for gross unrecognized income tax benefits, including interest and penalties, are summarized as follows:
Fiscal Years
20232022
Unrecognized tax benefits, beginning of period$9,112 $7,467 
Increases for tax positions taken related to a prior period— 160 
Increases for tax positions taken during the current period1,260 990 
Decreases for tax positions taken by an acquired company(2,679)615 
Decreases for tax positions taken related to a prior period(191)— 
Decreases for settlements of previously recognized positions(93)(92)
Decreases as a result of a lapse of the applicable statute of limitations(2,244)(28)
Unrecognized tax benefits, end of period$5,165 $9,112 
The $5,165 of unrecognized tax benefits as of June 30, 2023, if released, would reduce the Company's income tax provision.
The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. The total amount of gross interest and penalties accrued was $583 and $488 as of June 30, 2023 and July 1, 2022, respectively, and the amount of interest and penalties recognized in fiscal 2023 and 2022 was $96 and $172, respectively.
The Company’s major tax jurisdiction is the U.S. (Federal and state) and the open tax years are fiscal 2017 through 2023.