Income Taxes

12 Months Ended

Jun. 30, 2022

Income Taxes

Income Taxes

12. Income Taxes

The components of income before income taxes consisted of the following:

For the Year Ended June 30	2022		2021		2020
Domestic	$	27,695	$	12,684	$	(3,142)
Foreign		44,632		53,784		58,654
Income before income taxes	$	72,327	$	66,468	$	55,512

Components of the provision for income taxes were:

For the Year Ended June 30	2022		2021		2020
Current provision (benefit):
Federal	$	4,874	$	99	$	(1,271)
State and local		1,468		887		401
Foreign		17,613		13,280		14,705
Total current provision		23,955		14,266		13,835
Deferred provision (benefit):
Federal		(75)		291		5,226
State and local		251		(110)		696
Foreign		23		(2,663)		218
Change in valuation allowance–foreign		(1,002)		299		1,985
Total deferred provision (benefit)		(803)		(2,183)		8,125
Provision for income taxes	$	23,152	$	12,083	$	21,960

Reconciliations of the federal statutory rate to the Company’s effective tax rate were:

For the Year Ended June 30	2022		2021		2020
Federal income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal benefit	2.0		0.8		1.7
Foreign income tax rates	4.9		4.2		3.6
Changes in uncertain tax positions	4.4		(6.8)		5.2
Global Intangible Low-Taxed Income	0.3		1.3		6.2
Recognition of federal and foreign tax credits	(0.9)		(2.1)		(0.9)
Change in valuation allowance	(1.4)		0.5		3.6
Foreign derived intangible income	(2.1)		—		—
Other	3.8		(0.7)		(0.8)
Effective tax rate	32.0	%	18.2	%	39.6	%

We record the Global Intangible Low-Taxed Income (GILTI) aspects of comprehensive U.S. income tax legislation as a period expense.

The tax effects of significant temporary differences that comprise deferred tax assets and liabilities were:

As of June 30	2022		2021
Deferred tax assets:
Employee-related accruals	$	6,879	$	6,337
Inventory		2,288		2,094
Environmental remediation		751		765
Net operating loss carry forwards–domestic		1,323		1,522
Net operating loss carry forwards–foreign		4,348		5,517
Operating lease liabilities		7,639		8,312
Other		(1,066)		4,672
		22,162		29,219
Valuation allowance		(2,618)		(3,709)
		19,544		25,510
Deferred tax liabilities:
Property, plant and equipment and intangible assets		(7,187)		(7,550)
Operating lease ROU assets		(7,489)		(8,251)
Other		(24)		(793)
		(14,700)		(16,594)
Net deferred tax asset	$	4,844	$	8,916

Deferred taxes are included in the consolidated balance sheets as follows:

As of June 30	2022		2021
Other assets	$	5,849	$	9,861
Other liabilities		(1,005)		(945)
	$	4,844	$	8,916

The valuation allowance established against deferred tax assets was:

As of June 30	2022		2021		2020
Balance at beginning of period	$	3,709	$	3,403	$	808
(Benefit) provision for income taxes		(1,091)		306		2,595
Balance at end of period	$	2,618	$	3,709	$	3,403

The Company records valuation allowances against certain foreign and state deferred tax assets when, after considering all of the available evidence, it is more likely than not that these assets will not be realized.

The Company has $26,526 of state net operating loss carry forwards. $14,308 that will expire in 2023 through 2042, and $12,218 that do not expire, and $17,844 of foreign net operating loss carry forwards of which most are in jurisdictions that have no expiration.

If amounts are repatriated from certain of our foreign subsidiaries, we could be subject to additional non-U.S. income and withholding taxes. We consider undistributed earnings of such foreign subsidiaries to be indefinitely reinvested. At June 30, 2022, our cash and cash equivalents and short-term investments included $88,463 held by our international subsidiaries. We do not provide income taxes for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.

As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon examination. Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. Substantially all of these unrecognized tax benefits, if recognized, would reduce our effective income tax rate.

Reconciliations of the beginning and ending amounts of gross unrecognized tax benefits are as follows:

As of June 30	2022		2021		2020
Unrecognized tax benefits–beginning of period	$	5,311	$	9,507	$	6,343
Tax position changes–current period		5,333		1,873		2,850
Tax position changes–prior periods, including settlements with tax authorities		(1,175)		(5,354)		108
Lapse of statute of limitations		(1,071)		(1,109)		—
Effect of changes in exchange rates		(566)		394		206
Unrecognized tax benefits–end of period		7,832		5,311		9,507
Interest and penalties–end of period		427		391		969
Total liabilities related to uncertain tax positions	$	8,259	$	5,702	$	10,476

We recognize interest and penalties associated with uncertain tax positions as a component of the provision for income taxes. We recognized and recorded interest and penalties expense of $74, $69, and $214 for 2022, 2021 and 2020, respectively.

Income tax returns for the following periods are no longer subject to examination by the relevant tax authorities:

● U.S. federal and significant states, through June 30, 2019;

● Brazil, through December 31, 2016;

● Israel, through June 30, 2017, for certain subsidiaries and through June 30, 2019, for certain subsidiaries.