Income Taxes

9 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. 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.  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. 

The Company’s total liability for unrecognized tax benefits as of March 31, 2022 and June 30, 2021 was $46.0 million and $31.5 million, respectively. During the quarter, the Company recognized an increase in the liability for unrecognized tax benefits related to an increase in research and development tax credits. The $46.0 million unrecognized tax benefit at March 31, 2022, if recognized, would positively impact the Company’s effective tax rate.

The Company’s effective income tax rate was 17.9 percent and 20.9 percent for the three and nine months ended March 31, 2022, respectively, and 15.5 percent and 19.8 percent for the three and nine months ended March 31, 2021, respectively. Increases in the effective income tax rate were primarily due to the fact that comparative periods include additional research and development credits for prior year tax filings.

On January 1, 2022, a provision of the Tax Cuts and Jobs Act of 2017 went into effect which eliminates the option to deduct domestic research and development costs in the year incurred and instead requires taxpayers to amortize such costs over five years.  The House Ways and Means Committee has proposed tax legislation to delay the effective date of this change to 2026, but it is uncertain whether the proposed delay will ultimately be enacted into law.  If no new legislation is passed, the provision would go into effect for the Company’s fiscal year 2023 and is expected to decrease cash flows from operations and increase net deferred tax assets by a similar amount.  The Company is currently evaluating the potential impact on cash flows from operations.