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Income Taxes
 12 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and foreign components of income before provision for income taxes are as follows (in thousands):
Year Ended June 30,
202420232022
Domestic$480,145 $447,975 $421,942 
Foreign64,504 35,664 32,630 
Income before income taxes$544,649 $483,639 $454,572 
The components of income tax expense are as follows (in thousands):
Year Ended June 30,
202420232022
Current:
Federal$130,621 $184,040 $66,956 
State and local26,268 49,824 1,372 
Foreign17,599 11,053 9,880 
Total current174,488 244,917 78,208 
Deferred:
Federal(42,322)(109,894)(12,884)
State and local(6,827)(36,717)22,140 
Foreign(614)598 314 
Total deferred(49,763)(146,013)9,570 
Total income tax expense$124,725 $98,904 $87,778 
Income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0% as a result of the following (in thousands):
Year Ended June 30,
202420232022
Expected tax expense computed at federal statutory rate$114,376 $101,564 $95,460 
State and local taxes, net of federal benefit16,508 15,900 21,295 
Remeasurement of current year NOL— — (1,124)
R&D tax credit, net(12,604)(14,205)(15,708)
Stock-based compensation(2,385)(930)(3,981)
Nonincludible and nondeductible items, net4,368 1,105 1,588 
Remeasurement of deferred taxes(1,150)(5,546)(5,629)
Other5,612 1,016 (4,123)
Total income tax expense$124,725 $98,904 $87,778 
Effective income tax rate22.9 %20.4 %19.3 %
The effective tax rate for fiscal 2024 was favorably impacted by research and development tax credits, offset by state income taxes. The effective tax rate for fiscal 2023 was favorably impacted primarily by federal research tax credits and the remeasurement of state deferred taxes. The effective tax rate for fiscal 2022 was favorably impacted primarily by the Company’s method of accounting changes that resulted in a carryback of a federal income NOL and related income tax benefit as well as federal research tax credits.
The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):
June 30,
20242023
Deferred tax assets:
Operating lease liabilities$97,911 $102,679 
Reserves and accruals22,172 27,881 
Capitalized research and development170,086 191,872 
Credits and net operating loss carryovers9,407 4,284 
Deferred compensation and post-retirement obligations34,315 34,477 
Stock-based compensation12,362 11,032 
Valuation allowance(2,887)— 
Total deferred tax assets343,366 372,225 
Deferred tax liabilities:
Goodwill and other intangible assets(357,150)(331,845)
Property, plant and equipment(27,578)(31,068)
Operating lease right-of-use assets(74,769)(78,670)
Deferred revenue(23,591)(26,543)
Prepaid expenses(12,084)(11,177)
Interest rate swaps(8,322)(10,943)
Other(9,680)(2,524)
Total deferred tax liabilities(513,174)(492,770)
Net deferred tax liability$(169,808)$(120,545)
During fiscal 2023, a provision of the TCJA went into effect that 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. This provision decreased fiscal 2024 and 2023 cash flows from operations by $73.9 million and $95.0 million, respectively, and increased net deferred tax assets by a similar amount. The future impact of this provision will depend on any guidance issued by the Treasury Department regarding the identification of appropriate costs for capitalization, and the amount of future research and development expenses paid or incurred (among other factors).
The deferred tax assets and liabilities were remeasured in fiscal 2024 due to a reduction in the blended state effective tax rate.
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 (IRS) for fiscal 2017 through 2021 and one state jurisdiction for fiscal 2019 and 2020. Based on the current IRS audit status and expected conclusion timing, approximately $76.7 million of federal income tax receivables have been classified as long term as of June 30, 2024. The Company does not expect the resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows.
U.S. income taxes have not been provided for undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. As of June 30, 2024, the estimated deferred tax liability associated with these undistributed earnings is approximately $2.9 million.
Changes in the Company’s liability for unrecognized tax benefits is shown in the table below (in thousands):
Year Ended June 30,
202420232022
Beginning of year$153,860 $42,810 $31,505 
Additions based on prior year tax positions3,592 3,829 8,221 
Additions based on current year tax positions11,703 107,221 8,313 
Reductions based on prior year tax positions(96,111)— — 
Settlement with taxing authorities— — (5,229)
End of year$73,044 $153,860 $42,810 
Unrecognized tax benefits that, if recognized, would affect the effective tax rate$73,044 $56,944 $42,810 
The Company’s total liability for unrecognized tax benefits as of June 30, 2024, 2023 and 2022 was approximately $73.0 million, $153.9 million and $42.8 million, respectively. During fiscal 2023, the Company recognized an increase in reserves related to the required capitalization of research and development expenses, which became effective in fiscal 2023, and current and prior year research and development tax credits. During fiscal 2024, the Company reduced its unrecognized tax benefit, primarily due to completing a detailed analysis of capitalized research and development costs which considered recent guidance issued by the IRS.
The Company recognizes net interest and penalties as a component of income tax expense. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2024. As of June 30, 2024, the entire balance of unrecognized tax benefits is included in deferred taxes and other long-term liabilities.