Income Taxes

6 Months Ended

Dec. 31, 2022

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, or loss, 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 or benefit 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.

During the three and six months ended December 31, 2022 and 2021, deferred taxes were determined by the year-to-date tax benefit with current taxes accounting for the remaining tax expense or benefit recorded in the period. Income tax expense was $1.5 million, or 19.5 percent of pre-tax income for the three months ended December 31, 2022, as compared with income tax benefit of $5.6 million, or 16.0 percent of pre-tax loss for the three months ended December 31, 2021. Income tax expense for the six months ended December 31, 2022, was $0.5 million, or negative 500.0 percent of pre-tax loss as compared with income tax benefit of $16.1 million, or 26.7 percent of pre-tax loss for the six months ended December 31, 2021. The effective tax rate for the six months ended December 31, 2022 of negative 500.0 percent is due primarily to the near breakeven year-to-date pre-tax loss of $0.1 million for the six months ended December 31, 2022 in relation to permanent tax adjustments and discrete items during the current period.

Income tax expense for the three months ended December 31, 2022, includes the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized. Also included is a discrete tax benefit of $0.6 million for anticipated interest on IRS income tax refund claims. Income tax benefit for the three months ended December 31, 2021 reflected a change in the estimated full year results for the fiscal year. Also included was the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized.

Income tax expense for the six months ended December 31, 2022, includes the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized. Also included is a discrete tax benefit of $0.6 million for anticipated interest on IRS income tax refund claims as well as a discrete tax charge of $0.6 million for the impact of a state tax legislative change. Income tax benefit for the six months ended December 31, 2021 included the unfavorable impacts of losses in certain foreign jurisdictions for which no tax benefit can be recognized.

The Inflation Reduction Act of 2022 (the "IRA") was enacted on August 16, 2022. The IRA includes climate and energy provisions, extends the Affordable Care Act subsidies, increases Internal Revenue Enforcement funding and allows Medicare to negotiate prescription drug prices. The IRA creates a 15 percent corporate alternative minimum tax on profits of corporations whose average annual adjusted financial statement income for any consecutive three-tax-year period preceding the tax year exceeds $1.0 billion and is effective for tax years beginning after December 31, 2022. The IRA also creates an excise tax of 1 percent on stock repurchases by publicly traded U.S. corporations, effective for repurchases after December 31, 2022. The provisions of the IRA are not expected to have a significant impact on our financial position, results of operations or cash flows.