INCOME TAXES

The components of (loss) income from continuing operations before income taxes and equity in net loss (income) of equity-method investees were as follows:



	Fiscal Year Ended June 30,
	2019			2018			2017
Domestic	$	(134,096	)	$	(13,936	)	$	47,781
Foreign	82,109			95,138			40,097
Total	$	(51,987	)	$	81,202		$	87,878

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



	Fiscal Year Ended June 30,
	2019			2018			2017
Current:
Federal	$	3,639		$	(1,309	)	$	18,331
State and local	760			1,383			(293		)
Foreign	18,694			20,542			14,884
	23,093			20,616			32,922
Deferred:
Federal	(24,045		)	(22,612		)	(3,198		)
State and local	1,188			1,973			960
Foreign	(2,933		)	(864		)	(8,218		)
	(25,790		)	(21,503		)	(10,456		)
Total	$	(2,697	)	$	(887	)	$	22,466

For the fiscal year ended June 30, 2019, the Company paid cash for income taxes, net of refunds, of $22,535. Cash paid for income taxes, net of (refunds), during the fiscal years ended June 30, 2018 and 2017 amounted to $24,284 and $(2,900), respectively.

The reconciliation of the U.S. federal statutory rate to our effective rate on income before provision (benefit) for income taxes was as follows:



	Fiscal Year Ended June 30,
	2019			%		2018			%		2017			%
Expected United States federal income tax at statutory rate	$	(10,917	)	21.0	%	$	22,818		28.1	%	$	30,757		35.0	%
State income taxes, net of federal (benefit) provision	(9,793		)	18.8	%	2,774			3.4	%	2,757			3.1	%
Domestic manufacturing deduction	—			—	%	—			—	%	(846		)	(1.0	)%
Foreign income at different rates	205			(0.4	)%	(7,174		)	(8.8	)%	(6,539		)	(7.4	)%
Impairment of goodwill and intangibles	—			—	%	1,816			2.2	%	—			—	%
Change in valuation allowance	9,810			(18.9	)%	119			0.1	%	(60		)	(0.1	)%
Unrealized foreign exchange losses	—			—	%	—			—	%	807			0.9	%
Change in reserves for uncertain tax positions	841			(1.6	)%	(3,859		)	(4.8	)%	(4,417		)	(5.0	)%
Tax Act’s transition tax (a)	6,834			(13.1	)%	7,054			8.7	%	—			—	%
Tax Act’s impact of deferred taxes (b)	—			—	%	(25,006		)	(30.8	)%	—			—	%
Global Intangible Low Taxed Income	3,872			(7.4	)%	—			—	%	—			—	%
Reduction of deferred tax liabilities resulting from change in United Kingdom tax rate	—			—	%	—			—	%	(1,841		)	(2.1	)%
Other	(3,549		)	6.8	%	571			0.8	%	1,848			2.2	%
(Benefit) provision for income taxes	$	(2,697	)	5.2	%	$	(887	)	(1.1	)%	$	22,466		25.6	%

(a) For the year ended June 30, 2018, the Company accrued a provisional estimate of $7,054 of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings in accordance with U.S. Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB 118”). Additionally, during fiscal year June 30, 2019, the Company recorded $6,834 of tax expense upon finalizing its analysis of the impact from the Tax Act.

(b) For the year ended June 30, 2018, the Company accrued $25,006 in provisional tax benefit related to the net change in deferred tax liabilities stemming from the Tax Cuts and Jobs Act’s (the “Tax Act”) reduction of the U.S. federal tax rate from 35% to 21% and disallowance of certain incentive based compensation tax deductibility under Internal Revenue Code 162(m). There was an immaterial tax benefit recorded for the period ended June 30, 2019 related to return to provision adjustments.

With the effective date of January 1, 2018, the Tax Act also introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under the base erosion anti-abuse tax “BEAT” regime. For the fiscal year ended June 30, 2019, the Company did not generate intercompany transactions that met the BEAT threshold but did generate GILTI tax. The Company elected to account for GILTI tax as a current period cost and recorded an expense of $3,872 during the fiscal year ended June 30, 2019.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Deferred tax assets and liabilities consisted of the following:



	June 30, 2019			June 30, 2018
Noncurrent deferred tax assets/(liabilities):
Basis difference on inventory	$	9,128		$	9,139
Reserves not currently deductible	23,518			11,060
Basis difference on intangible assets	(92,923		)	(97,365		)
Basis difference on property and equipment	(6,060		)	(8,444		)
Other comprehensive income	502			(133		)
Net operating loss and tax credit carryforwards	73,976			18,276
Stock-based compensation	827			1,348
Other	3,985			41
Valuation allowances	(34,912		)	(20,831		)
Noncurrent deferred tax liabilities, net⁽¹⁾	$	(21,959	)	$	(86,909	)

(1) Includes $29,951 of non-current deferred tax assets included within Other Assets on the June 30, 2019 consolidated balance sheet.

At June 30, 2019 and 2018, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $201,242 and $23,057, respectively, the majority of which will not expire until 2036. Certain of these federal loss carryforwards are subject to Internal Revenue Code Section 382 which imposes limitations on utilization following certain changes in ownership of the entity generating the loss carryforward. The Company had foreign NOL carryforwards of approximately $23,761 and $30,065 at June 30, 2019 and 2018, respectively, the majority of which are indefinite lived.

At June 30, 2019, the Company utilized the U.S. federal foreign tax credit carryforward of approximately $877.

The company historically considered the undistributed earnings of its foreign subsidiaries to be indefinitely reinvested and as a result has not provided for taxes on such earnings. The company has not changed previous indefinite reinvestment assertion following the enactment of the Tax Act, which required a one-time transition tax for deemed repatriation of accumulated undistributed earnings of certain foreign subsidiaries. At June 30, 2019, cumulative undistributed earnings of foreign subsidiaries were approximately $289,076 which partially have been already subjected to U.S. transition tax as part of the Tax Act. If the company determines that all or a portion of its foreign earnings are no longer indefinitely reinvested, then the company may be subject to additional foreign withholding taxes and U.S. state income taxes, beyond the Tax Act’s one-time transition tax.

As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, we establish a valuation allowance. We have recorded valuation allowances in the amounts of $34,912 and $20,831 at June 30, 2019 and 2018, respectively. During fiscal 2019, we recorded a partial valuation allowance against our state deferred tax assets and state net operating loss carryforwards as it is not more likely than not that the state tax attributes will be realized.

The changes in valuation allowances against deferred income tax assets were as follows:



	Fiscal Year Ended June 30,
	2019			2018
Balance at beginning of year	$	20,831		$	20,712
Additions charged to income tax expense	17,773			1,251
Reductions credited to income tax expense	(3,231		)	(1,345		)
Currency translation adjustments	(461		)	213
Balance at end of year	$	34,912		$	20,831

Unrecognized tax benefits activity, including interest and penalties, is summarized below:



	Fiscal Year Ended June 30,
	2019			2018			2017
Balance at beginning of year	$	6,730		$	11,602		$	16,019
Additions based on tax positions related to the current year	248			118			217
Additions based on tax positions related to prior years	5,446			—			—
Reductions due to lapse in statute of limitations and settlements	(555		)	(4,990		)	(4,634		)
Balance at end of year	$	11,869		$	6,730		$	11,602

As of June 30, 2019, the Company had $11,869 of unrecognized tax benefits, of which $8,057 represents the amount that, if recognized, would impact the effective tax rate in future periods. As of June 30, 2018 and 2017, the Company had $6,730 and $11,602, respectively, of unrecognized tax benefits of which $2,917 and $6,409, respectively, would impact the effective income tax rate in future periods. Accrued liabilities for interest and penalties were $275 and $82 at June 30, 2019 and 2018, respectively. Interest and penalties (expense and/or benefit) are recorded as a component of the provision (benefit) for income taxes in the consolidated financial statements.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and several foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to fiscal 2016. However, to the extent we generated NOLs or tax credits in closed tax years, future use of the NOL or tax credit carryforward balance would be subject to examination within the relevant statute of limitations for the year in which utilized. The Company is no longer subject to tax examinations in the United Kingdom for years prior to fiscal 2016. Given the uncertainty regarding when tax authorities will complete their examinations and the possible outcomes of their examinations, a current estimate of the range of reasonably possible significant increases or decreases of income tax that may occur within the next twelve months cannot be made. Although there are various tax audits currently ongoing, the Company does not believe the ultimate outcome of such audits will have a material impact on the Company’s consolidated financial statements.