(8) INCOME TAXES

The Company’s provision for income taxes from operations are summarized as follows:


	June 30,
	2018		2017		2016
	(in millions)
Current Income Taxes
Federal	$	(9.3)	$	1.6	$	(1.3)
State		2.0		6.3		8.7
Foreign		8.4		(2.1)		3.9
Total	$	1.1	$	5.8	$	11.3
Deferred Income Taxes
Federal	$	62.9	$	13.3	$	7.3
State		4.1		2.4		(2.3)
Foreign		(42.0)		(3.1)		(7.8)
Total		25.0		12.6		(2.8)
Total provision for income taxes	$	26.1	$	18.4	$	8.5

The United States and foreign components of income/(loss) from operations before income taxes are as follows:


	June 30,
	2018		2017		2016
	(in millions)
United States	$	71.0	$	66.6	$	(46.9)
Foreign		57.0		37.5		(20.8)
Total	$	128.0	$	104.1	$	(67.7)

The Company’s effective income tax rate differs from what would be expected if the federal statutory rate were applied to earnings before income taxes primarily because of certain expenses that represent permanent differences between book and tax expenses and deductions, such as stock-based compensation expense.

A reconciliation of the actual income tax provision and the tax computed by applying the U.S. federal rate to the earnings before income taxes during the years ended June 30, 2018, 2017 and 2016 are as follows:


	June 30,
	2018		2017		2016
	(in millions)
Expected provision/(benefit) at the statutory rate	$	35.9	$	36.4	$	(23.8)
Increase/(decrease) due to:
Stock-based compensation		3.8		(11.7)		27.9
State income taxes, net of federal benefit		3.2		2.9		(2.1)
Transaction costs not deductible for U.S. federal income tax purposes		0.4		1.9		1.5
Change in statutory tax rate, non-U.S.		7.4		(1.4)		(3.6)
Change in valuation allowance		(49.3)		(10.2)		2.8
State NOL expirations		6.1		—		—
U.S. Tax Reform		24.8		—		—
Foreign tax rate differential		(2.4)		(3.9)		2.7
Other, net		(3.8)		4.4		3.1
Provision for income taxes	$	26.1	$	18.4	$	8.5

The effective tax rate for the year ended June 30, 2018 was positively impacted by reversing the valuation allowances on the deferred tax assets of certain foreign subsidiaries that have returned to profitability. The effective tax rate was negatively impacted by U.S. Tax Reform principally relating to the estimated income tax on the deemed repatriation of previously deferred foreign earnings.

On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, previously known as Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). U.S. Tax Reform reduced the U.S. corporate tax rate from 35% to 21%, created a territorial tax system with a one-time mandatory repatriation tax on previously deferred foreign earnings, and changed business-related deductions and credits.

ASC 740, Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment. The SEC staff issued SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which will allow registrants to record provisional amounts during a ‘measurement period’. SAB 118 allows a registrant to recognize provisional amounts when it does not have the necessary information available, prepared or analyzed(including computations) in reasonable detail to complete its accounting for the change in tax law. The measurement period ends when a registrant has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.

In accordance with SAB 118, the Company has recorded provisional tax expense each quarter as follows:


	December 31, 2017		March 31, 2018		June 30, 2018		Total Tax Expense		Deferred Tax Liability		Tax Receivable
Change in statutory rate, U.S. only	$	1.4	$	0.2	$	(15.2)	$	(13.6)	$	(3.4)	$	10.2
Changes to indefinite reinvestment assertion		7.9		(0.4)		(6.7)		0.8		0.8		—
Repatriation tax		34.8		4.8		(2.0)		37.6		37.6		—
Net impacts of U.S. Tax Reform	$	44.1	$	4.6	$	(23.9)	$	24.8	$	35.0	$	10.2

The company continues to record provisional amounts during the measurement period. Management is in the process of obtaining and evaluating further information related to the provisional amounts estimated for items including the mandatory repatriation amounts and impacts to deferred tax assets and liabilities. Management has made estimates as it anticipates additional guidance and legislative action from the U.S. Federal and State governments in addition to interpretations and guidance from the SEC and FASB regarding the application of U.S. Tax Reform. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

Other U.S. Tax Reform provisions are effective for years beginning after December 31, 2017, which would be the Company’s Fiscal 2019, including the tax on global intangible low taxed income, Base Erosion and Anti-abuse Tax, interest expense limitations, and executive compensation limitations. We continue to evaluate these and other impacts of U.S. Tax Reform as more information and guidance becomes available.

As of December 31, 2017, the Company has reversed its indefinite reinvestment assertion on all its foreign subsidiaries because the Company will be required to pay tax on all the accumulated undistributed earnings of its foreign subsidiaries. In accordance with SAB 118, the Company recorded a provisional amount of $0.8 million as a deferred tax liability for an estimate of the additional tax due upon actual repatriation.


	Fiscal Year
U.S. Tax Rates		2017	2018	2019
Federal rate		35%	28%	21%
Blended federal and state rates		39%	33%	26%

The Company files income tax returns in various federal, state, and local jurisdictions including the United States, Canada, United Kingdom and France. In the normal course of business, the company is subject to examination by taxing authorities throughout the world. With few exceptions, the company is no longer subject to income tax examinations by tax authorities in major tax jurisdictions for years before 2013.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $1.8 million and $0.2 million at June 30, 2018 and 2017, respectively because the uncertain tax positions are permanent differences. We recognize interest and penalties related to uncertain tax positions in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $0.1 million and $0.1 million at June 30, 2018 and 2017, respectively. The Company expects $1.9 million could be settled within the next year.


	Year Ended June 30, 2018
Balance at beginning of year	$	0.2
Additions for current year tax positions		1.2
Additions for prior year tax positions		1.7
Reductions as a result of settlement with tax authority		(0.1)
Balance at end of year	$	3.0

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:


	June 30,
	2018		2017
	(in millions)
Deferred income tax assets
Net operating loss carry forwards	$	545.2	$	715.2
Tax credit carry forwards		17.9		22.6
Deferred revenue		305.0		405.9
Accrued expenses		41.4		40.0
Other liabilities		2.3		17.4
Reserves against accounts receivable		15.8		18.2
Deferred compensation		11.2		20.3
Total deferred income tax assets		938.8		1,239.6
Valuation allowance		(72.9)		(111.1)
Net deferred tax assets		865.9		1,128.5
Deferred income tax liabilities
Property and equipment		680.9		712.2
Intangible assets		293.3		412.4
Debt issuance costs		2.4		5.8
Total deferred income tax liabilities		976.6		1,130.4
Less SRT deferred tax liabilities held for sale		(5.1)		—
Net deferred income tax liabilities	$	(105.6)	$	(1.9)

As of June 30, 2018, the Company had $1,917.2 million of U.S. federal net operating loss ("NOL") carry forwards. The Company generated approximately $245.5 million of NOL carry forwards during Fiscal 2018 mostly due to accelerated tax depreciation as provided by U.S. Tax Reform. The Company has completed several acquisitions in which it acquired net operating loss tax attributes as part of the purchase. These acquisitions, however, were considered a "change in ownership” within the meaning of Section 382 of the Internal Revenue Code and, as a result, such NOL carry forwards are subject to an annual limitation, reducing the amount available to offset income tax liabilities absent the limitation. Currently available U.S. federal NOL carry forwards as of June 30, 2018 are approximately $1,356.2 million. An additional $135.8 million will become available for use during fiscal year ended June 30, 2019. The Company's U.S. federal NOL carry forwards, if not utilized to reduce U.S. federal taxable income in future periods, will expire in various amounts beginning in 2019 and ending in 2037.

As of June 30, 2018, the Company had approximately $384.3 million of foreign jurisdiction net operating loss carry forwards, primarily in Canada, the United Kingdom and France. The majority of these foreign NOLs have a valuation allowance reducing the value of the corresponding deferred tax asset in the financial statements due to recent losses. It is reasonably possible that the Company may reverse the valuation allowance recorded on certain foreign subsidiaries’ deferred tax assets in the near future.

As of June 30, 2018, the Company had tax-effected state net operating loss carry forwards of approximately $53.9 million, which are subject to limitations on their utilization and have various expiration dates 2019 through 2037. The Company believes $51.6 million of this balance will be utilized and has provided a valuation allowance for the remainder.

Management believes it is more likely than not that it will utilize its net deferred tax assets to reduce or eliminate tax payments in future periods, with the exception of deferred tax assets related to certain foreign subsidiaries. The Company’s evaluation encompassed (i) a review of its recent history of taxable income for the past three years and (ii) a review of internal financial forecasts demonstrating its expected ability to fully utilize its deferred tax assets prior to expiration.