Income Taxes

9 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur. The annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pre-tax income of the Company in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year. In addition, the Company’s tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

Income tax expense for the three months ended March 31, 2020 was $10.0 million, or 20.0 percent of pre-tax income as compared with $16.9 million, or 24.9 percent of pre-tax income for the three months ended March 31, 2019. Income tax expense for the nine months ended March 31, 2020 was $34.6 million, or 22.4 percent of pre-tax income as compared with $35.3 million, or 23.0 percent of pre-tax income for the nine months ended March 31, 2019.

Income tax expense in the three and nine months ended March 31, 2020 includes tax benefits of $1.6 million as a result of changes in the Company’s prior year tax positions. Income tax expense in the nine months ended March 31, 2019 included tax benefits of $1.8 million as a result of changes in the Company’s prior year tax positions.

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The CARES Act established new provisions, including but not limited to, expanded deduction of certain qualified capital expenditures, delayed payment of certain employment taxes, expanded use of net operating losses, reduced limitations on deductions of interest expense and extension of funding for defined benefit plans. The Company is continuing to evaluate these provisions but does not anticipate the CARES Act will have a significant impact on our financial position, results of operations or cash flows.

The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Tax Cuts and Jobs Act included provisions that reduced the federal corporate income tax rate, created a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings (i.e. transition tax), and changed certain business deductions including allowing for immediate expensing of certain qualified capital expenditures and limitations on deductions of interest expense. The accounting for the income tax effects of the Tax Cuts and Jobs Act was completed during the three months ended December 31, 2018. A discrete tax benefit of $0.2 million was recorded for the transition tax offset by a discrete tax charge of $0.2 million for the re-measurement of deferred tax assets and liabilities in the three months ended December 31, 2018.