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Income Tax
6 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax

Note 14. Income Tax

 

On a quarterly basis, the Company provides for income taxes based upon an estimated annual effective income tax rate. The Company recognized an income tax expense of $0.5 million and $1.0 million for the three and six months ended December 31, 2018, respectively, primarily related to foreign taxes. The Company recognized an income tax benefit of less than $0.1 million and an income tax expense of $0.7 million for the three and six months ended December 31, 2017, respectively.

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code (the “IRC”). Changes include, but are not limited to, reduction in the U.S. corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, limitations on the deductibility of executive compensation, interest expense, net operating loss, immediate expensing of capital expenditures, a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017 and the transition of the U.S. international taxation from a “worldwide” system to a territorial system of taxation and the introduction of a base erosion and anti-abuse tax.

 

In accordance with Staff Accounting Bulletin (SAB) No. 118 - Income Tax Accounting Implications of the Tax Cuts and Jobs Act, the effects of the Tax Act may be adjusted within a one-year measurement period from the enactment date for items that were previously reported as provisional, or where a provisional estimate could not be made. The Company has finalized its assessment of the transitional impacts of the Tax Act, which did not impact its tax expense for the three and six months ended December 31, 2018. Any legislative changes, including the final Section 965 transition tax regulations issued on January 15, 2019, whose impact is currently being assessed due to the complexity and interdependency of the legislative provisions, as well as any other new or proposed Treasury regulations, which have yet to be issued, will be evaluated, but the Company does not expect any material financial impact in the period any such changes are enacted.

 

The Tax Act has a requirement that certain income earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFC’s U.S. shareholder. The income required to be included in gross income is referred to as global intangible low tax income (“GILTI”) and is as defined under IRC Section 951A as is the excess of the shareholder’s net CFC tested income over the net deemed tangible income return. The GILTI inclusion amount is expected to be fully absorbed by net operating losses and is not expected to cause the Company to be in a U.S. taxable income position for fiscal year 2019. The Company has made a policy decision to record GILTI tax as a current-period expense when incurred.

 

In addition to the GILTI provision, the Tax Act also enacted the Base Erosion and Anti-Abuse Tax (“BEAT”). The BEAT minimum tax under IRC Section 59A is applicable to the extent that the BEAT tax amount is greater than the regular corporate tax for a given year. This tax is applicable to companies with prior 3-year average annual gross receipts exceeding $500 million. The Company does not currently meet this threshold since its current average annual gross receipts are less than $500 million.