Income Taxes

9 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recognized income tax benefit of approximately $1.0 million and income tax expense of $0.6 million for the three months ended March 31, 2020 and 2019, respectively. The income tax benefit of $1.0 million for the three months ended March 31, 2020 included a $1.3 million discrete tax benefit, $1.1 million of which related to re-measuring the tax benefit of net operating losses that can be carried back to prior years following the passage of the "U.S. Coronavirus Aid, Relief and Economic Security Act” (“CARES Act”), and $0.2 million of which primarily related to a prior year reserve release. The income tax expenses of $0.6 million for the three months ended March 31, 2019 included a $0.2 million discrete tax benefit principally related to a prior year reserve release. Excluding the discrete income tax items, the effective tax rate for the three months ended March 31, 2020 and 2019 was (2.3)% and (14.8)%, respectively. The changes in the tax expense between the periods resulted primarily from the discrete tax benefit resulting from the tax law changes resulting from the CARES Act as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.

The Company recognized income tax benefit of approximately $0.04 million and income tax expense of $1.9 million for the nine months ended March 31, 2020 and 2019, respectively. The income tax benefit of $0.04 million for the nine months ended March 31, 2020 included a $1.3 million discrete tax benefit, $1.1 million of which related to remeasuring the tax benefit of net operating losses that can be carried back to prior years following the passage of the U.S. CARES Act, and $0.2 million of which related to a prior year reserve release. The income tax expense of $1.9 million for the nine months ended March 31, 2019 included a $0.1 million discrete tax benefit principally related to a prior year reserve release. Excluding the discrete income tax items, the effective tax rate for the nine months ended March 31, 2020 and 2019 was (7.4)% and (19.2)%, respectively. The changes in the tax expense between the periods resulted primarily from the discrete tax benefit resulting from the tax law changes resulting from the CARES Act as well as changes in the mix of earnings in various geographic jurisdictions between the current year and the same period of last year.

The Company files its income tax returns in the United States and in various foreign jurisdictions. The tax years 2001 to 2020 remain open to examination by U.S. federal and state tax authorities. The tax years 2012 to 2020 remain open to examination by foreign tax authorities.

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of March 31, 2020, the gross amount of unrecognized tax benefits was approximately $7.2 million, of which $4.2 million, if recognized, would reduce the effective income tax rate in future periods. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.

On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In the July 2015 ruling, the Tax Court concluded

that the sharing of the cost of employee stock compensation in a company’s cost-sharing arrangement was invalid under the U.S. Administrative Procedures Act. In June 2019, a panel of the Ninth Circuit of the U.S. Court of Appeals reversed this decision. In July 2019, Altera petitioned U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing of the case. In November 2019 the en banc rehearing petition was denied, and Altera has asked the Supreme Court for a judicial review. Due to the uncertainty surrounding the status of the current regulations and questions related to the scope of potential benefits, the Company has not recorded any benefit as of March 31, 2020. The Company will continue to monitor ongoing developments and potential impacts to its financial statements.