Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the periods prior to the Entertainment Distribution, the Company did not file separate tax returns as the Company was included in the tax grouping of other MSG Sports entities within the respective entity’s tax jurisdiction. The income tax provision included in these periods has been calculated using the separate return basis, as if the Company filed a separate tax return.

Income tax expense (benefit) is comprised of the following components:

	Years Ended June 30,
	2022		2021		2020
Current expense (benefit):
Federal	$	(620)	$	45,354	$	58,530
State and other	6,105		31,728		34,460
	5,485		77,082		92,990
Deferred expense (benefit):
Federal	(27,904)		(47,149)		7,080
State and other	(3,366)		(24,208)		1,620
	(31,270)		(71,357)		8,700
Income tax expense (benefit)	$	(25,785)	$	5,725	$	101,690

The income tax expense (benefit) differs from the amount derived by applying the statutory federal rate to pre-tax income (loss) principally due to the effect of the following items:

	Years Ended June 30,
	2022		2021		2020
Federal tax expense (benefit) at statutory federal rate	$	(45,346)	$	(33,767)	$	52,816
State income taxes, net of federal benefit	(10,003)		(4,705)		31,111
Change in the estimated applicable tax rate used to determine deferred taxes	(4,199)		3,117		(662)
Nondeductible transaction costs	10,723		87		6,961
Federal tax credits	(2,150)		—		(1,480)
GAAP income of consolidated partnership attributable to non-controlling interest	(892)		3,857		6,703
Tax effect of indefinite intangible amortization	—		1,072		993
Change in valuation allowance	11,402		25,704		1,605
Nondeductible officers’ compensation	12,759		9,646		6,454
Nondeductible expenses	975		379		728
Excess tax benefit related to share-based payment awards	(87)		(105)		(3,852)
Other	1,033		440		313
Income tax expense (benefit)	$	(25,785)	$	5,725	$	101,690

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The tax effects of temporary differences which give rise to significant portions of the deferred tax assets and liabilities at June 30, 2022 and 2021 are as follows:

	June 30,
	2022		2021
Deferred tax asset:
Net operating loss (“NOL”) carryforwards	$	182,629	$	172,432
Tax credit carryforwards	2,682		532
Accrued employee benefits	44,487		38,756
Restricted stock units and stock options	18,992		18,189
Deferred revenue	—		29,540
Right-of-use lease assets and lease liabilities, net	14,531		7,864
Investments	74,027		40,237
Other	—		6,912
Total deferred tax assets	$	337,348	$	314,462
Less valuation allowance	(80,835)		(69,900)
Net deferred tax assets	$	256,513	$	244,562
Deferred tax liabilities:
Intangible and other assets	$	(307,964)	$	(313,122)
Property and equipment	(89,750)		(120,981)
Prepaid expenses	(5,472)		(4,620)
Deferred interest	(3,282)		(6,164)
Deferred revenue	(9,332)		—
Other	(4,154)		—
Total deferred tax liabilities	$	(419,954)	$	(444,887)
Net deferred tax liability	$	(163,441)	$	(200,325)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company’s ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income to allow for the utilization of its federal net operating loss carryforward and its future deductible temporary differences. As of June 30, 2022, based on current facts and circumstances, management believes that it is more likely than not that the Company will not realize the benefit for a portion of its deferred tax assets. Accordingly, a partial valuation allowance has been recorded as of June 30, 2022. The Company will continue to assess the realizability of its deferred tax assets on a quarterly basis.

The NOL carryforwards as of June 30, 2022 are approximately $539,000 and are carried forward indefinitely. The Company’s historical combined financial statements for periods prior to the Entertainment Distribution reflect NOLs and tax credits calculated on a separate return basis. These NOL carryforwards were calculated as if the Company operated as a separate stand-alone entity. Because the Entertainment Distribution involved a spin-off of the Company, substantially all of the NOLs and tax credits did not carry over to the Company.

Prior to the Entertainment Distribution, the Company and MSG Sports entered into a Tax Disaffiliation Agreement (“TDA”) that governs the parties’ respective rights, responsibilities and obligations with respect to taxes and tax benefits. Under the TDA, MSG Sports will generally be responsible for all U.S. federal, state, local and other applicable income taxes of the Company for any taxable period or portion of such period ending on or before the Entertainment Distribution Date.

The Company does not have any recorded tax benefit for uncertain tax positions as of June 30, 2022 and 2021.

The Company was notified during Fiscal Year 2019 that the State of New Jersey initiated an examination of MSG Networks Inc.’s income tax returns for the tax years 2015 through 2017. The Company does not expect the examination, when finalized, to result in material changes to the tax returns.

The Company was notified during Fiscal Year 2021 that the State of New York initiated an audit of MSG Networks Inc.’s income tax return for the tax year 2019. The Company does not expect the examination, when finalized, to result in material changes to the tax return.

Income tax payments, net of refunds, were $(1,014), $101,972 and $75,328 for Fiscal Years 2022, 2021 and 2020, respectively.