Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 16 – Income Taxes

The domestic and foreign components of income before provision for income taxes are as follows (in thousands):

	Year Ended June 30,
	2022		2021		2020
Domestic	$	421,942	$	471,711	$	379,414
Foreign		32,630		27,904		22,223
Income before income taxes	$	454,572	$	499,615	$	401,637

The components of income tax expense are as follows (in thousands):

	Year Ended June 30,
	2022			2021			2020
Current:
Federal	$	66,956		$	(94,143	)	$	42,268
State and local		1,372			19,958			14,744
Foreign		9,880			7,384			5,271
Total current		78,208			(66,801	)		62,283
Deferred:
Federal		(12,884	)		109,157			12,940
State and local		22,140			185			5,465
Foreign		314			(369	)		(531	)
Total deferred		9,570			108,973			17,874
Total income tax expense	$	87,778		$	42,172		$	80,157

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,
	2022			2021			2020
Expected tax expense computed at federal statutory rate	$	95,460		$	104,919		$	84,344
State and local taxes, net of federal benefit		21,295			21,252			15,965
Remeasurement of current year NOL		(1,124	)		(56,192	)		—
R&D tax credit, net		(15,708	)		(18,173	)		(10,700	)
Stock-based compensation		(3,981	)		(5,525	)		(10,900	)
Nonincludible and nondeductible items, net		1,588			(2,269	)		3,133
Remeasurement of deferred taxes		(5,629	)		—			—
Other		(4,123	)		(1,840	)		(1,685	)
Total income tax expense	$	87,778		$	42,172		$	80,157
Effective income tax rate		19.3	%		8.4	%		20.0	%

The effective tax rate for fiscal 2022 was favorably impacted primarily by federal research tax credits and the remeasurement of state deferred taxes.

The effective tax rate for fiscal 2021 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 effective tax rate for fiscal 2020 was favorably impacted primarily by federal research tax credits and the amount of excess tax benefits under ASU 2016-09, Stock Compensation.

The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):

	June 30,
	2022			2021
Deferred tax assets:
Operating lease liabilities	$	99,997		$	110,282
Reserves and accruals		46,513			58,900
Credits and net operating loss carryovers		6,647			39,123
Deferred compensation and post-retirement obligations		31,537			36,183
Stock-based compensation		11,907			11,767
Interest rate swaps		—			6,800
Other		—			2,757
Total deferred tax assets		196,601			265,812
Deferred tax liabilities:
Goodwill and other intangible assets		(318,150	)		(291,282	)
Property, plant and equipment		(102,940	)		(167,527	)
Operating lease right-of-use assets		(80,551	)		(90,186	)
Deferred revenue		(34,850	)		(35,115	)
Prepaid expenses		(11,162	)		(8,932	)
Interest rate swaps		(4,954	)		—
Other		(835	)		—
Total deferred tax liabilities		(553,442	)		(593,042	)
Net deferred tax liability	$	(356,841	)	$	(327,230	)

The deferred tax assets and liabilities were revalued in fiscal 2022 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 for fiscal 2017 through 2021. Based on the current IRS audit status and expected conclusion timing, approximately $73.5 million of federal income tax receivables have been classified as long term as of June 30, 2022. 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, 2022, the estimated deferred tax liability associated with these undistributed earnings is approximately $2.6 million.

Changes in the Company’s liability for unrecognized tax benefits is shown in the table below (in thousands):

	Year Ended June 30,
	2022			2021			2020
Beginning of year	$	31,505		$	8,826		$	1,530
Additions based on prior year tax positions		8,221			20,025			5,003
Additions based on current year tax positions		8,313			5,702			2,293
Settlement with taxing authorities		(5,229	)		(3,048	)		—
End of year	$	42,810		$	31,505		$	8,826

The Company’s total liability for unrecognized tax benefits as of June 30, 2022, 2021 and 2020 was approximately $42.8 million, $31.5 million and $8.8 million, respectively. During fiscal 2022, the Company recognized an increase in reserves related to current and prior year research and development tax credits. Any amount, if recognized, would positively impact the Company’s effective tax rate.

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, 2022. As of June 30, 2022, the entire balance of unrecognized tax benefits is included in other long-term liabilities.