Income Taxes

12 Months Ended

Jun. 30, 2021

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,
	2021		2020		2019
	(in millions)
Earnings before income taxes:
U.S.	$	604.4	$	492.4	$	526.4
Foreign	91.8		87.2		80.8
Total	$	696.2	$	579.5	$	607.3

The Provision for income taxes consists of the following components:

	Years Ended June 30,
	2021		2020		2019
	(in millions)
Current:
U.S. Domestic	$	51.2	$	46.7	$	88.8
Foreign	34.9		33.1		24.7
State	10.5		8.3		15.1
Total current	96.7		88.1		128.7
Deferred:
U.S. Domestic	55.3		33.1		2.2
Foreign	(9.5)		(10.7)		(2.8)
State	6.2		6.5		(2.9)
Total deferred	52.0		29.0		(3.5)
Total Provision for income taxes	$	148.7	$	117.0	$	125.2

	Years Ended June 30,
	2021		%	2020		%	2019		%
	(in millions)
Provision for income taxes at U.S. statutory rate	$	146.2	21.0	$	121.7	21.0	$	127.5	21.0
Increase (decrease) in Provision for income taxes from:
State taxes, net of federal tax	15.2		2.2	11.3		1.9	12.0		2.0
Foreign tax differential	4.8		0.7	3.2		0.6	3.8		0.6
Valuation allowances	1.0		0.1	2.4		0.4	0.4		0.1
Stock-based compensation - excess tax benefits (“ETB”)	(16.9)		(2.4)	(15.6)		(2.7)	(19.3)		(3.2)
Tax Act Items	—		—	—		—	(0.5)		(0.1)
Other	(1.6)		(0.2)	(5.9)		(1.0)	1.3		0.2
Total Provision for income taxes	$	148.7	21.4	$	117.0	20.2	$	125.2	20.6

The Provision for income taxes and effective tax rates for the fiscal year ended June 30, 2021 were $148.7 million and 21.4%, compared to $117.0 million and 20.2%, for the fiscal year ended June 30, 2020, respectively. The increase in the effective tax rate for the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020 was primarily driven by lower discrete benefits, partially offset by higher ETB of $16.9 million for the fiscal year ended June 30, 2021 compared to $15.6 million for the fiscal year ended June 30, 2020.

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.

As of June 30, 2021, the Company had approximately $727.8 million of accumulated earnings and profits attributable to foreign subsidiaries. The Company considers $436.8 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 $291.0 million of accumulated earnings to be permanently reinvested outside the U.S. The Company has accrued approximately $16.3 million of foreign income and withholding taxes, state income taxes, and tax on exchange gain 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, 2021 and 2020 were as follows:

	June 30,
	2021		2020
	(in millions)
Classification:
Long-term deferred tax assets (included in Other non-current assets)	$	5.9	$	2.6
Long-term deferred tax liabilities	(400.7)		(126.8)
Net deferred tax liabilities	$	(394.8)	$	(124.2)
Components:
Deferred tax assets:
Accrued expenses not currently deductible	$	8.2	$	3.1
Compensation and benefits not currently deductible	64.7		59.1
Net operating and capital losses	33.6		16.4
Tax credits	11.2		7.7
Other	15.8		9.1
Total deferred tax assets	133.4		95.5
Less: Valuation allowances	(10.5)		(6.7)
Deferred tax assets, net	123.0		88.8
Deferred tax liabilities:
Goodwill and identifiable intangibles	319.1		112.8
Depreciation	29.0		17.3
Net deferred expenses	142.5		66.5
Unremitted earnings	16.3		9.5
Other	10.9		7.0
Deferred tax liabilities	517.8		213.0
Net deferred tax liabilities	$	(394.8)	$	(124.2)

The Company has estimated foreign net operating loss carryforwards of approximately $63.0 million as of June 30, 2021 of which $7.9 million are subject to expiration in the June 30, 2022 through June 30, 2041 period, and of which $55.1 million has an indefinite utilization period. In addition, the Company has estimated U.S. federal net operating loss carryforwards of approximately $43.5 million of which $24.4 million are subject to expiration in the June 30, 2022 through June 30, 2037 period with the balance of $19.1 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 of certain subsidiaries to offset future taxable earnings. The Company has recorded valuation allowances of $10.5 million and $6.7 million at June 30, 2021 and 2020, 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,
	2021		2020		2019
	(in millions)
Beginning balance	$	37.1	$	40.2	$	22.8
Gross increase related to prior period tax positions	12.2		0.5		17.3
Gross increase related to current period tax positions	4.3		5.9		2.8
Gross decrease related to prior period tax positions	(2.9)		(9.5)		(2.6)
Ending balance	$	50.7	$	37.1	$	40.2

As of June 30, 2021, 2020 and 2019, the net reserve for unrecognized tax positions recorded by the Company that is included in the preceding table of gross unrecognized tax positions was $47.5 million, $33.8 million, and $33.4 million, respectively, and if reversed in full, would favorably affect the effective tax rate by these amounts, respectively.

The $2.9 million, $9.5 million, and $2.6 million gross decreases in fiscal years 2021, 2020 and 2019, 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, 2021, 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, 2020, the Company adjusted accrued interest by 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 for interest on unrecognized tax positions of $3.6 million.

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, 2021, and for Canadian operations that could be subject to audit in Canada, fiscal years ending June 30, 2015 through June 30, 2021. A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements.