Income Taxes

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES 

Earnings before income taxes shown below are based on the geographic location to which such earnings are attributable.

	Years Ended June 30,
	2020		2019		2018
	(in millions)
Earnings before income taxes:
U.S.	$	492.4	$	526.4	$	450.0
Foreign	87.2		80.8		111.1
Total	$	579.5	$	607.3	$	561.0

The Provision for income taxes consists of the following components:

	Years Ended June 30,
	2020		2019		2018
	(in millions)
Current:
U.S. Domestic	$	46.7	$	88.8	$	89.4
Foreign	33.1		24.7		43.4
State	8.3		15.1		9.6
Total current	88.1		128.7		142.4
Deferred:
U.S. Domestic	33.1		2.2		(13.6)
Foreign	(10.7)		(2.8)		4.9
State	6.5		(2.9)		(0.6)
Total deferred	29.0		(3.5)		(9.3)
Total Provision for income taxes	$	117.0	$	125.2	$	133.1

	Years Ended June 30,
	2020		%	2019		%	2018		%
	(in millions)
Provision for income taxes at U.S. statutory rate	$	121.7	21.0	$	127.5	21.0	$	157.4	28.1
Increase (decrease) in Provision for income taxes from:
State taxes, net of federal tax	11.3		1.9	12.0		2.0	9.4		1.7
Foreign tax differential	3.2		0.6	3.8		0.6	(2.4)		(0.4)
Valuation allowances	2.4		0.4	0.4		0.1	(5.0)		(0.9)
Stock-based compensation - excess tax benefits (“ETB”)	(15.6)		(2.7)	(19.3)		(3.2)	(40.9)		(7.3)
Tax Act Items	—		—	(0.5)		(0.1)	15.4		2.7
Other	(5.9)		(1.0)	1.3		0.2	(0.8)		(0.1)
Total Provision for income taxes	$	117.0	20.2	$	125.2	20.6	$	133.1	23.7

The Provision for income taxes and effective tax rates for the fiscal year ended June 30, 2020 were $117.0 million and 20.2%, compared to $125.2 million and 20.6%, for the fiscal year ended June 30, 2019, respectively. The decrease in the effective tax rate for the fiscal year ended June 30, 2020 compared to the fiscal year ended June 30, 2019 was primarily driven by higher discrete benefits, partially offset by lower ETB of $15.6 million for the fiscal year ended June 30, 2020 compared to $19.3 million for the fiscal year ended June 30, 2019.

The Provision for income taxes and effective tax rates for the fiscal year ended June 30, 2019 were $125.2 million and 20.6%, compared to $133.1 million and 23.7%, for the fiscal year ended June 30, 2018, respectively. The decrease in the effective tax rate for the fiscal year ended June 30, 2019 compared to the fiscal year ended June 30, 2018 is primarily due to a reduced statutory U.S. federal tax rate as well as a prior period net tax charge relating to the enactment of the Tax Act, partially offset by the recognition of lower ETB attributable to stock-based compensation compared to the ETB recognized in fiscal year ended June 30, 2018. In the fiscal year ending June 30, 2019, the Company’s federal corporate statutory income tax rate was 21.0% compared to a blended tax rate of 28.1% for the prior fiscal year. In addition, notwithstanding the reduction in the federal corporate statutory income tax rate for the fiscal year ended June 30, 2018, the Tax Act required the Company to accrue a transition tax on earnings of certain foreign subsidiaries at December 31, 2017, and which in turn led to the accrual of applicable foreign withholding taxes to repatriate such earnings subject to the transition tax. At June 30, 2018 the Company estimated the transition tax and applicable foreign withholding taxes to be approximately $30.8 million, partially offset by a benefit of approximately $15.3 million relating to the remeasurement of the Company’s net deferred tax liabilities. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provided the Company with up to one year to finalize accounting for the impacts of the Tax Act. Under SAB 118, the Company finalized the prior year estimate of the transition tax and applicable withholding taxes and recognized a tax benefit of approximately $0.5 million in the fiscal year ended June 30, 2019. In addition to the lower corporate tax rate, the Tax Act introduced two new federal tax provisions relating to foreign source earnings, (i) a minimum tax on global intangible low-tax income (“GILTI”) and (ii) a deduction for foreign-derived intangible income (“FDII”). Both provisions were effective beginning with the fiscal year ended June 30, 2019, and on a net basis generated a tax benefit of approximately $1.8 million.

As of June 30, 2020, the Company had approximately $525.4 million of accumulated earnings and profits attributable to foreign subsidiaries. The Company considers $265.0 million of accumulated earnings attributable to foreign subsidiaries to be permanently reinvested outside the U.S. and has not determined the cost to repatriate such earnings since it is not practicable to calculate the amount of income taxes payable in the event all such foreign earnings are repatriated. The Company does not consider the remaining $260.4 million of accumulated earnings to be permanently reinvested outside the U.S. The Company has accrued approximately $8.9 million of foreign withholding taxes and $0.6 million of state income taxes attributable to such earnings.

Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s deferred tax assets and liabilities at June 30, 2020 and 2019 were as follows:

	June 30,
	2020		2019
	(in millions)
Classification:
Long-term deferred tax assets (included in Other non-current assets)	$	2.6	$	5.5
Long-term deferred tax liabilities	(126.8)		(86.7)
Net deferred tax liabilities	$	(124.2)	$	(81.3)
Components:
Deferred tax assets:
Accrued expenses not currently deductible	$	3.1	$	3.2
Compensation and benefits not currently deductible	59.1		57.6
Net operating and capital losses	16.4		11.1
Tax credits	7.7		7.5
Other	9.1		6.1
Total deferred tax assets	95.5		85.6
Less: Valuation allowances	(6.7)		(3.3)
Deferred tax assets, net	88.8		82.2
Deferred tax liabilities:
Goodwill and identifiable intangibles	112.8		100.9
Depreciation	17.3		10.1
Net deferred expenses	66.5		33.6
Unremitted earnings	9.5		12.2
Other	7.0		6.8
Deferred tax liabilities	213.0		163.5
Net deferred tax liabilities	$	(124.2)	$	(81.3)

The Company has estimated foreign net operating loss carryforwards of approximately $13.1 million as of June 30, 2020 of which $1.5 million expires in the June 30, 2020 through June 30, 2028 period, and of which $11.6 million has an indefinite utilization period. In addition, the Company has estimated U.S. federal net operating loss carryforwards of approximately $37.0 million of which $16.9 million can be utilized through June 30, 2030 with the balance of $20.2 million having an indefinite utilization period.

Valuation allowances are recognized to reduce deferred tax assets when it is more likely than not that the Company will not be able to utilize the deferred tax assets attributable to net operating and capital loss carryforwards of certain subsidiaries to offset future taxable earnings. The Company has recorded valuation allowances of $6.7 million and $3.3 million at June 30, 2020 and 2019, respectively. The determination as to whether a deferred tax asset will be recognized is made on a jurisdictional basis and is based on the evaluation of historical taxable income or loss, projected future taxable income, carryforward periods, scheduled reversals of deferred tax liabilities and tax planning strategies. Projected future taxable income is based on expected results and assumptions as to the jurisdiction in which the income will be earned. The assumptions used to project future taxable income require significant judgment and are consistent with the plans and estimates used to manage the underlying businesses.

In the next twelve months, the Company does not expect a material change to its net reserve balance for unrecognized tax benefits.

The following table summarizes the activity related to the Company’s gross unrecognized tax positions:

	Fiscal Year Ended June 30,
	2020		2019		2018
	(in millions)
Beginning balance	$	40.2	$	22.8	$	18.7
Gross increase related to prior period tax positions	0.5		17.3		3.5
Gross increase related to current period tax positions	5.9		2.8		3.0
Gross decrease related to prior period tax positions	(9.5)		(2.6)		(2.4)
Ending balance	$	37.1	$	40.2	$	22.8

As of June 30, 2020, 2019 and 2018, the net reserve for unrecognized tax positions recorded by the Company that is included in the preceding table of gross unrecognized tax positions was $33.8 million, $33.4 million, and $19.4 million respectively, and if reversed in full, would favorably affect the effective tax rate by these amounts, respectively.

The $9.5 million, $2.6 million and $2.4 million gross decreases in fiscal years 2020, 2019 and 2018, respectively, for prior period tax positions related to certain tax audit settlements and certain state, federal and foreign statute of limitation expirations.

During the fiscal year ended June 30, 2020, the Company adjusted accrued interest by approximately less than $0.1 million and recognized a total liability for interest on unrecognized tax positions of $3.6 million; in the fiscal year ended June 30, 2019, the Company adjusted accrued interest by approximately $(0.1) million and recognized a total liability of $3.6 million for interest on unrecognized tax positions; in the fiscal year ended June 30, 2018 the Company adjusted accrued interest by approximately $0.5 million and recognized a total liability of $3.7 million for interest on unrecognized tax positions.

The Company is regularly subject to examination of its income tax returns by U.S. Federal, state and foreign income tax authorities. The tax years that are currently open and could be subject to income tax audits for U.S. federal and most state and local jurisdictions are fiscal years ending June 30, 2013 through June 30, 2020, and for Canadian operations that could be subject to audit in Canada, fiscal years ending June 30, 2015 through June 30, 2020. A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements.