Income Taxes

6 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company is currently under examination by the Internal Revenue Service for fiscal years 2017 through 2021 and a state jurisdiction for fiscal years 2019 and 2020. The Company does not expect resolution of these examinations to have a material impact on its results of operations, financial condition, or cash flows.

During fiscal year 2023, a provision of the Tax Cuts and Jobs Act of 2017 (TCJA) went into effect which eliminated the option to deduct domestic research and development costs in the year incurred and instead requires taxpayers to capitalize and amortize such costs over five years. Based upon our interpretation of the law as currently enacted, we estimate that the fiscal 2024 impact will result in increases of $75.3 million to both our income taxes payable and net deferred tax assets. We also estimate a fiscal 2024 increase to our liability for unrecognized tax benefits of $72.9 million, with a corresponding increase to net deferred tax assets. Although it is possible that Congress amends this provision, potentially with retroactive effect, we have no assurance that Congress will take any action with respect to this provision. For the six months ended December 31, 2023, the Company recognized a $35.8 million increase in our liability for unrecognized tax benefits and a $36.9 million increase in income taxes payable, with corresponding increases to net deferred tax assets.

The Company’s effective income tax rate was 20.7% and 21.9% for the three and six months ended December 31, 2023, respectively, and 21.5% and 22.5% for the three and six months ended December 31, 2022, respectively. The effective tax rates for the three and six months ended December 31, 2023, and 2022 were favorably impacted by research and development tax credits, partially offset by the unfavorable impacts of certain executive compensation.