Income Taxes

12 Months Ended

Jun. 30, 2023

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,
	2023		2022		2021
	(in millions)
Earnings before income taxes:
U.S.	$	710.6	$	609.9	$	604.4
Foreign	84.2		62.3		91.8
Total	$	794.9	$	672.2	$	696.2

The Provision for income taxes consists of the following components:

	Years Ended June 30,
	2023		2022		2021
	(in millions)
Current:
U.S. Federal	$	143.2	$	25.4	$	51.2
Foreign	45.4		45.4		34.9
U.S. State	26.5		11.7		10.5
Total current	215.1		82.4		96.7
Deferred:
U.S. Federal	(23.7)		65.8		55.3
Foreign	(29.3)		(31.7)		(9.5)
U.S. State	2.2		16.6		6.2
Total deferred	(50.8)		50.7		52.0
Total Provision for income taxes	$	164.3	$	133.1	$	148.7

	Years Ended June 30,
	2023		%	2022		%	2021		%
	(in millions)
Provision for income taxes at U.S. statutory rate	$	166.9	21.0	$	141.2	21.0	$	146.2	21.0
Increase (decrease) in Provision for income taxes from:
State taxes, net of federal tax	23.7		3.0	23.9		3.6	15.2		2.2
Foreign rate differential	2.7		0.3	(1.5)		(0.2)	4.8		0.7
Valuation allowances	(0.3)		—	0.3		—	1.0		0.1
Stock-based compensation - excess tax benefits (“ETB”)	(10.4)		(1.3)	(18.1)		(2.7)	(16.9)		(2.4)
Tax Credits and Foreign-Derived Intangible Income Deduction (“FDII”)	(20.2)		(2.5)	(16.6)		(2.5)	(8.8)		(1.3)
Other	1.9		0.2	3.9		0.6	7.2		1.0
Total Provision for income taxes	$	164.3	20.7	$	133.1	19.8	$	148.7	21.4

The Provision for income taxes and effective tax rates for the fiscal year ended June 30, 2023 were $164.3 million and 20.7%, compared to $133.1 million and 19.8%, for the fiscal year ended June 30, 2022, respectively. The increase in the effective tax rate for the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022 was driven by lower total discrete benefits, primarily attributable to an ETB of $10.4 million for the fiscal year ended June 30, 2023 compared to $18.1 million for the fiscal year ended June 30, 2022.

The Provision for income taxes and effective tax rates for the fiscal year ended June 30, 2022 were $133.1 million and 19.8%, compared to $148.7 million and 21.4%, for the fiscal year ended June 30, 2021, respectively. The decrease in the effective tax rate for the fiscal year ended June 30, 2022 compared to the fiscal year ended June 30, 2021 was primarily driven by higher total discrete benefits, in addition to higher ETB of $18.1 million for the fiscal year ended June 30, 2022 compared to $16.9 million for the fiscal year ended June 30, 2021.

As of June 30, 2023, the Company had approximately $769.2 million of accumulated earnings and profits attributable to foreign subsidiaries. The Company considers $585.9 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 $183.3 million of accumulated earnings to be permanently reinvested outside the U.S. The Company has accrued approximately $11.5 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, 2023 and 2022 were as follows:

	June 30,
	2023		2022
	(in millions)
Classification:
Long-term deferred tax assets (included in Other non-current assets)	$	14.5	$	9.8
Long-term deferred tax liabilities	(391.3)		(446.1)
Net deferred tax liabilities	$	(376.8)	$	(436.3)
Components:
Deferred tax assets:
Accrued expenses not currently deductible	$	8.2	$	8.7
Compensation and benefits not currently deductible	75.8		68.0
Net operating losses	26.3		29.8
Tax credits	11.5		13.1
Research and development expenses	90.6		—
Other	24.1		27.6
Total deferred tax assets	236.5		147.1
Less: Valuation allowances	(10.3)		(10.7)
Deferred tax assets, net	226.2		136.5
Deferred tax liabilities:
Goodwill and identifiable intangibles	215.9		248.0
Depreciation	14.5		21.5
Net deferred expenses	329.4		249.5
Unremitted earnings	11.5		14.7
Cross Currency Swap and Treasury-Locks	14.4		22.4
Other	17.3		16.7
Deferred tax liabilities	603.0		572.8
Net deferred tax liabilities	$	(376.8)	$	(436.3)

The Company has estimated foreign net operating loss carryforwards of approximately $45.1 million as of June 30, 2023 of which $7.6 million are subject to expiration in the June 30, 2026 through June 30, 2042 period, and of which $37.5 million has an indefinite utilization period. In addition, the Company has estimated U.S. federal net operating loss carryforwards of approximately $35.3 million of which $15.5 million are subject to expiration in the June 30, 2024 through June 30, 2037 period with the balance of $19.8 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 $10.3 million and $10.7 million at June 30, 2023 and 2022, 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,
	2023		2022		2021
	(in millions)
Beginning balance	$	57.6	$	50.7	$	37.1
Gross increases related to prior period tax positions	13.2		8.3		12.2
Gross decreases related to prior period tax positions	(3.3)		(0.5)		—
Gross increases related to current period tax positions	6.9		8.3		4.3
Gross decreases related to settlements	(0.3)		(4.2)		(0.2)
Gross decreases due to lapse of the statute of limitations	(5.4)		(5.0)		(2.7)
Ending balance	$	68.8	$	57.6	$	50.7

As of June 30, 2023, 2022 and 2021, the net reserve for unrecognized tax positions recorded by the Company that is included in the preceding table of gross unrecognized tax positions was $62.0 million, $51.6 million, and $47.5 million, respectively, and if reversed in full, would favorably affect the effective tax rate by these amounts, respectively.

During the fiscal year ended June 30, 2023, the Company adjusted accrued interest by $0.3 million and recognized a total liability for interest on unrecognized tax positions of $4.1 million; in the fiscal year ended June 30, 2022, the Company adjusted accrued interest by $0.2 million and recognized a total liability for interest on unrecognized tax positions of $3.8 million; in the fiscal year ended June 30, 2021, 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.

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, 2020 through June 30, 2023, and for Canadian operations that could be subject to audit in Canada, fiscal years ending June 30, 2016 through June 30, 2023. A change in the assessment of the outcomes of such matters could materially impact our Consolidated Financial Statements.