We file U.S. federal income tax returns and returns in various state, local and foreign jurisdictions. Generally, we are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years before 2001.


	Fiscal Year Ended June 30,
	2020		2019		2018
	(in thousands)
Current:
Federal	$	43	$	56	$	(673)
State	84		123		20
Foreign	2,530		2,430		1,915
	2,657		2,609		1,262
Deferred:
Federal	(314)		(1,724)		(7,271)
State	336		(441)		687
Foreign	(851)		(2,982)		(2,881)
	(829)		(5,147)		(9,465)
	$	1,828	$	(2,538)	$	(8,203)

Our income tax expense (benefit) included a tax benefit of $0.4 million in each of the fiscal years 2020, 2019 and 2018, respectively, relating to a reduction in our unrecognized tax benefits upon the expiration of certain statutes of limitations.


	Fiscal Year Ended June 30,
	2020		2019		2018
	(in thousands)
North America	$	(2,417)	$	9,403	$	(29)
United Kingdom	4,918		4,184		7,144
Continental Europe	1,292		2,194		6,062
Asia-Pacific and Middle East	(11,194)		(8,887)		(12,052)
	$	(7,401)	$	6,894	$	1,125


	Fiscal Year Ended June 30,
	2020		2019		2018
Tax expense (benefit) at federal statutory rate	(21.0	%)	21.0	%	28.1	%
State taxes, net of federal benefit	(5.5	%)	(11.1	%)	5.5	%
Change in valuation allowance	32.8	%	3.7	%	(168.9	%)
Non-deductible executive compensation	28.3	%	48.4	%	90.3	%
Changes in uncertain tax positions	13.6	%	2.0	%	12.9	%
Foreign branch operations, net of foreign tax deductions	8.8	%	9.7	%	91.2	%
Non-deductible other expenses	5.2	%	6.1	%	39.2	%
Non-deductible acquisition costs	0.1	%	7.2	%	26.0	%


Changes in tax laws or rates ⁽¹⁾	(4.7	%)	(10.8	%)	(738.7	%)
Tax rate differential on foreign earnings	(7.3	%)	(4.5	%)	(50.7	%)
Research and development credit	(11.1	%)	(14.8	%)	(33.4	%)
Share-based payments	(15.3	%)	(94.0	%)	(33.4	%)
Other	0.8	%	0.3	%	2.6	%

	24.7	%	(36.8	%)	(729.3	%)

(1)The impact on our effective tax rate due to changes in tax laws or rates includes the revaluation of deferred tax assets, deferred tax liabilities and the corresponding change in our valuation allowance.

The increase in our effective tax rate over the statutory tax rate for the fiscal year ended June 30, 2020 was primarily due to the inability to benefit U.S. and Israel losses. This increase was partially offset by tax benefits associated with share-based compensation. The decrease in our effective tax rate compared to the statutory tax rate for the fiscal year ended June 30, 2019 was due to tax benefits associated with share-based compensation and the enactment of legislation that decreased statutory tax rates in Switzerland. The decrease in our effective tax rate compared to the statutory tax rate for the fiscal year ended June 30, 2018 is principally due to the provisions of the Tax Cuts and Jobs Act, which reduced the U.S. federal income tax rate from 35% to 21%. Our blended U.S. federal income tax rate for the fiscal year ended June 30, 2018 was 28.06%.

We recognize deferred tax assets and liabilities based on the differences between their financial reporting and tax basis by applying tax rates that are expected to be in effect when the differences reverse. Significant components of our deferred income taxes are as follows:


	June 30,
	2020		2019
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	38,795	$	35,049
Research and development and other credits	7,815		7,183
Stock compensation	6,848		7,217
Lease Liabilities	6,261		—
Deferred revenue	4,577		6,103
Various accrued expenses	3,281		2,731
Accrued pension	2,834		2,742
Unrealized loss - interest swap	1,377		349
Acquired intangible assets	851		622
Property and equipment	445		536
Allowances and reserves	353		171
Other	466		207
Total deferred tax assets	$	73,903	$	62,910
Valuation allowance	(34,830)		(32,538)
Deferred tax assets, net of valuation allowance	39,073		30,372

Deferred tax liabilities:
Property and equipment, inclusive of capitalized software	(15,735)		(12,205)
Acquired intangible assets	(12,903)		(15,422)
Deductible goodwill acquired intangible assets	(7,384)		(7,010)
Capitalized Costs	(5,559)		(5,805)
Right of Use Assets	(5,659)		—


Other	(489)		(275)
Total deferred tax liabilities	(47,729)		(40,717)
Net deferred tax liabilities	$	(8,656)	$	(10,345)

At June 30, 2020, we had U.S. net operating loss carryforwards of $121.6 million, of which $104.8 million expire at various times through fiscal year 2037 and $16.8 million of which have no statutory expiration date.

We have approximately $7.8 million of research and development tax credit carryforwards available, which expire at various points through fiscal year 2040. Our operating losses and tax credit carryforwards may be subject to limitations under provisions of the Internal Revenue Code.

We record a deferred tax asset if we believe that it is more likely than not that we will realize a future tax benefit. Ultimate realization of any deferred tax asset is dependent on our ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any. Our assessment of deferred tax asset recoverability considers many different factors including historical and projected operating results, the reversal of existing deferred tax liabilities that provide a source of future taxable income, the impact of current tax planning strategies and the availability of future tax planning strategies. We establish a valuation allowance against any deferred tax asset for which we are unable to conclude that recoverability is more likely than not. This is inherently judgmental, since we are required to assess many different factors and evaluate as much objective evidence as we can in reaching an overall conclusion.

At June 30, 2020, we had a $34.8 million valuation allowance against certain deferred tax assets given the uncertainty of recoverability of these amounts. The valuation allowance increased by $2.3 million in fiscal year 2020 due predominantly to the increase in net operating losses during the year.

As of June 30, 2020, we had approximately $11.3 million of total gross unrecognized tax benefits, of which approximately $1.9 million represented the amount of unrecognized tax benefits that, if recognized, would favorably affect our effective income tax rate in future periods. Approximately $3.3 million of the gross unrecognized tax benefits resulted in a reduction to tax credit carryforwards. We currently anticipate that our unrecognized tax benefits will decrease within the next twelve months by approximately $0.3 million, as a result of the expiration of certain statutes of limitations associated with intercompany transactions subject to tax in multiple jurisdictions.


	(in thousands)





Balance at July 1, 2017	8,656
Additions related to current year tax positions	1,041
Reductions related to prior year tax positions	(85)
Reductions due to lapse of statute of limitations	(432)
Reductions due to audit closure	(122)
Change in tax rates	(368)
Foreign currency translation	11
Balance at July 1, 2018	8,701
Additions related to current year tax positions	1,257
Additions related to prior year tax positions	56
Reductions due to lapse of statute of limitations	(377)

Change in tax rates	319
Foreign currency translation	(43)
Balance at July 1, 2019	9,913
Additions related to current year tax positions	1,810
Reductions related to prior year tax positions	(19)
Reductions due to lapse of statute of limitations	(399)
Change in tax rates	49
Foreign currency translations	(44)
Balance at July 1, 2020	$	11,310

We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. To the extent that the accrued interest and penalties do not ultimately become payable, the amounts accrued will be derecognized and reflected as an income tax benefit in the period that such a determination is made. Our accrued interest and penalties related to uncertain tax positions for all periods presented were not significant.