Income Taxes

6 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recorded a provision for income taxes of $7.6 million and $10.9 million for the three and six months ended December 31, 2021, respectively, and $5.1 million and $8.8 million for the three and six months ended December 31, 2020, respectively. The effective tax rate was 15.4% and 14.1% for the three and six months ended December 31, 2021, respectively, and 14.9% and 13.9% for the three and six months ended December 31, 2020, respectively. The effective tax rate for the three and six months ended December 31, 2021 is higher than that for the three and six months ended December 31, 2020, primarily due to a decrease in the deduction from foreign-derived intangible income and an increase in certain non-deductible expenses.

As of December 31, 2021, the Company had gross unrecognized tax benefits of $45.1 million, of which, $28.4 million, if recognized, would affect the Company's effective tax rate. During the six months ended December 31, 2021, there was a $4.4 million increase in gross unrecognized tax benefits. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes on the condensed consolidated statements of operations. As of December 31, 2021, the Company had accrued $2.9 million of interest and penalties relating to unrecognized tax benefits.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted. The CARES Act provides temporary relief from certain aspects of the 2017 Tax Reform Act that imposed limitations on the utilization of certain losses, interest expense deductions and alternative minimum tax credits and made a technical correction to the 2017 Tax Reform Act related to the depreciable life of qualified improvement property. The CARES Act does not have a material impact on the Company.

The Company has determined that its foreign undistributed earnings are indefinitely reinvested except for undistributed earnings related to the Company's operations in the Netherlands. The Company may repatriate certain foreign earnings from the Netherlands that have been previously taxed in the U.S. The tax impact of such repatriation is estimated to be immaterial.

The Company believes that it has adequately provided reserves for all uncertain tax positions; however, amounts asserted by tax authorities could be greater or less than the Company’s current position. Accordingly, the Company’s provision on federal, state and foreign tax related matters to be recorded in the future may change as revised estimates are made or as the underlying matters are settled or otherwise resolved.

The federal statute of limitations remains open in general for tax years ended June 30, 2018 through 2021. Various states statutes of limitations remain open in general for tax years ended June 30, 2017 through 2021. Certain statutes of limitations in major foreign jurisdictions remain open in general for the tax years ended June 30, 2016 through 2021. It is reasonably possible that the Company's gross unrecognized tax benefits will decrease by approximately $1.0 million, in the next 12 months, due to the lapse of the statute of limitations. These adjustments, if recognized, would positively impact the Company's effective tax rate, and would be recognized as additional tax benefits.