XML 32 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Income Taxes
9 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

The effective tax rate for the three months ended March 31, 2018 and 2017 was 24.6% and 29.0%, respectively. The decrease in the effective tax rate is primarily due to the impacts of the Act, the release of reserves for uncertain tax positions, and the benefit of a tax accounting method change filed with the IRS in the three months ended March 31, 2018, partially offset by the impact of a benefit due to tax incentives associated with the domestic production activity deduction and research tax credit in the three months ended March 31, 2017.
The effective tax rate for the nine months ended March 31, 2018 and 2017 was 23.1% and 31.5%, respectively. The decrease in the effective tax rate is primarily due to the impacts of the Act and the release of reserves for uncertain tax positions, partially offset by prior period impacts of the sale of the CHSA and COBRA businesses and the impact of a benefit due to tax incentives associated with the domestic production activity deduction and research tax credit.
The Act reduces the U.S. federal corporate income tax rate from 35% to 21%. In accordance with ASC 740 companies are required to re-measure deferred tax balances using the new enacted tax rates. The Act requires companies to pay a one-time transition tax on earnings of the Company's foreign subsidiaries that were previously tax deferred for U.S. income taxes and creates new taxes on the Company's foreign sourced earnings. The rate change is administratively effective at the beginning of the Company's fiscal year resulting in a blended corporate statutory tax rate for fiscal 2018 of 28.1%.
Income tax expense reported for the nine months ended March 31, 2018 reflect the effects of the Act and resulted in a decrease in income tax expense of approximately $140 million which includes a one-time net benefit of $42.9 million. The $42.9 million is comprised of the application of the newly enacted rates to the Company's U.S. deferred tax balances partially offset by the one-time transition tax and the recording of a valuation allowance against the Company's foreign tax credits which may not be realized. The Act’s foreign tax credit provisions may limit the Company’s ability to utilize existing foreign tax credits in future periods, accordingly we have estimated that approximately $20.6 million could expire unutilized.
The accounting for the effects of the rate change on deferred tax balances is not complete and provisional amounts were recorded for these items. The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. The benefit recorded relating to the re-measurement of the Company's deferred tax balances was $82.0 million. The Company is still analyzing certain aspects of the Act and refining calculations, which could potentially affect the re-measurement of these balances or potentially give rise to new deferred tax amounts.
The one-time transition tax is based on the total post-1986 earnings and profits ("E&P") that was previously deferred from US income taxes. The Company recorded a provisional amount for the one-time transition tax liability of $18.6 million for the Company's foreign subsidiaries. The Company has not yet completed the calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from US federal taxation and finalizes the amounts held in cash or other specified assets.