Income Taxes

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Earnings before income taxes shown below are based on the geographic location to which such earnings are attributable.

Years ended June 30,	2024		2023		2022
Earnings before income taxes:
United States	$	4,408.0	$	4,091.4	$	3,461.8
Foreign	464.3		346.2		342.3
	$	4,872.3	$	4,437.6	$	3,804.1

The provision (benefit) for income taxes consists of the following components:

Years ended June 30,	2024		2023		2022
Current:
Federal	$	847.4	$	840.0	$	620.7
Foreign	132.8		104.6		97.5
State	177.5		161.1		100.4
Total current	1,157.7		1,105.7		818.6
Deferred:
Federal	(18.7)		(77.4)		20.7
Foreign	(6.6)		4.3		(12.9)
State	(12.1)		(7.0)		28.8
Total deferred	(37.4)		(80.1)		36.6
Total provision for income taxes	$	1,120.3	$	1,025.6	$	855.2

A reconciliation between the Company's effective tax rate and the U.S. federal statutory rate is as follows:

Years ended June 30,	2024		%	2023		%	2022		%
Provision for taxes at U.S. statutory rate	$	1,023.2	21.0	$	931.9	21.0	$	798.9	21.0
Increase/(decrease) in provision from:
State taxes, net of federal tax benefit	120.6		2.5	111.2		2.5	91.8		2.4
Foreign rate differential	41.0		0.9	33.1		0.7	41.3		1.1
Excess tax benefit - Stock-based compensation	(17.1)		(0.4)	(19.0)		(0.4)	(19.9)		(0.5)
Other	(47.4)		(1.0)	(31.6)		(0.7)	(56.9)		(1.5)
	$	1,120.3	23.0	$	1,025.6	23.1	$	855.2	22.5

The effective tax rate in fiscal 2024 and 2023 was 23.0% and 23.1%, respectively. The decrease in the effective tax rate is primarily due to a valuation allowance release and an intercompany transfer of certain assets offset by a lower benefit for adjustments to prior year tax liabilities in fiscal 2024.

The effective tax rate for fiscal 2023 and 2022 was 23.1% and 22.5%, respectively. The increase in the effective tax rate is primarily due to an intercompany transfer of certain assets that resulted in a lower effective tax rate in fiscal 2022 and higher reserves for uncertain tax positions in fiscal 2023.

The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:

Years ended June 30,	2024		2023
Deferred tax assets:
Accrued expenses not currently deductible	$	237.4	$	209.5
Stock-based compensation expense	51.3		48.8
Foreign tax credits	12.0		13.3
Fixed and intangible assets	194.9		108.2
Net operating losses	41.7		37.5
Prepaid royalty	—		18.0
Unrealized investment losses, net	351.4		519.5
Other	39.1		39.9
	927.8		994.7
Less: valuation allowances	(11.1)		(18.6)
Deferred tax assets, net	$	916.7	$	976.1
Deferred tax liabilities:
Deferred contract costs	$	620.7	$	578.1
Prepaid expenses	88.8		78.9
Prepaid retirement benefits	40.3		30.8
Tax on unrepatriated earnings	10.2		10.1
Other	20.8		20.7
Deferred tax liabilities	780.8		718.6
Net deferred tax assets	$	135.9	$	257.5

There are $200.2 million and $331.1 million of long-term deferred tax assets included in other assets on the Consolidated Balance Sheets at June 30, 2024 and 2023, respectively.

Income taxes have not been provided on undistributed earnings of certain foreign subsidiaries in an aggregate amount of approximately $53.0 million as the Company considers such earnings to be permanently reinvested outside of the United States. As of June 30, 2024, it is not practicable to estimate the unrecognized tax liability that would occur upon distribution.

The Company has estimated foreign net operating loss carry-forwards of approximately $74.0 million as of June 30, 2024, of which $0.9 million expire through June 2034 and $73.1 million have an indefinite utilization period. As of June 30, 2024, the Company has approximately $26.5 million of federal net operating loss carry-forwards from acquired companies. The net operating losses have an annual utilization limitation pursuant to section 382 of the Internal Revenue Code and expire through June 2036.

The Company has state net operating loss carry-forwards of approximately $196.8 million as of June 30, 2024, which expire through June 2043. The Company has recorded valuation allowances of $11.1 million and $18.6 million at June 30, 2024 and 2023, respectively, to reflect the estimated amount of domestic and foreign deferred tax assets that may not be realized.

Income tax payments were approximately $1,185.2 million, $1,080.7 million, and $856.8 million for fiscal 2024, 2023, and 2022, respectively.

As of June 30, 2024, 2023, and 2022 the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $126.9 million, $116.9 million, and $98.1 million respectively. The amount that, if recognized, would impact the effective tax rate is $91.8 million, $83.6 million, and $68.1 million, respectively. The remainder, if recognized, would principally impact deferred taxes.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	2024		2023		2022
Unrecognized tax benefits at beginning of the year	$	116.9	$	98.1	$	99.9
Additions for tax positions	17.2		11.3		8.0
Additions for tax positions of prior periods	17.8		16.8		11.6
Reductions for tax positions of prior periods	(12.8)		(5.0)		(8.5)
Settlement with tax authorities	(9.0)		(1.8)		(2.0)
Expiration of the statute of limitations	(2.9)		(1.0)		(9.2)
Impact of foreign exchange rate fluctuations	(0.3)		(1.5)		(1.7)
Unrecognized tax benefit at end of year	$	126.9	$	116.9	$	98.1

Interest expense and penalties associated with uncertain tax positions have been recorded in the provision for income taxes on the Statements of Consolidated Earnings. During the fiscal years 2024, 2023, and 2022, the Company recorded interest expense of $5.7 million, $9.1 million, and $3.5 million, respectively. Penalties recorded during fiscal years 2024 and 2023 were not significant. During fiscal year 2022, the Company recorded penalties of $0.3 million.

At June 30, 2024 and June 30, 2023, the Company had accrued interest of $32.6 million and $30.0 million, respectively, recorded on the Consolidated Balance Sheets within other liabilities. At June 30, 2024, the Company had no accrued penalties. At June 30, 2023, the Company's accrued penalties recorded on the Consolidated Balance Sheets within other liabilities were not material. At June 30, 2022, the Company's accrued penalties of $0.3 million, were recorded on the Consolidated Balance Sheets within income taxes payable.

The Company is routinely examined by the IRS and tax authorities in foreign countries in which it conducts business, as well as tax authorities in states in which it has significant business operations. The tax years currently under examination vary by jurisdiction. Examinations in progress in which the Company has significant business operations are as follows:

Taxing Jurisdiction	Fiscal Years under Examination
U.S. (IRS)	2023 - 2024
Arizona	2016 - 2020
Massachusetts	2016 - 2020
New York City	2016 - 2021
New York State	2019 - 2021
India	2014 - 2018, 2020 - 2022

The Company regularly considers the likelihood of assessments resulting from examinations in each of the jurisdictions. The resolution of tax matters is not expected to have a material effect on the consolidated financial condition of the Company, although a resolution could have a material impact on the Company's Statements of Consolidated Earnings for a particular future period and on the Company's effective tax rate.

If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions. Based on current estimates, the Company is not projecting any settlements. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a revision become known.