Income Taxes

9 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

In general, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates, to determine its quarterly provision for income taxes. The Company calculated its tax rate on a discrete basis for the nine months ended March 31, 2019 due to significant variations in the relationship between tax expense and projected pre-tax income. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability on the effective tax rates from quarter to quarter. The Company’s effective tax rate may change from period-to-period based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes and tax audit settlements.

On March 27, 2020, H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into legislation which includes tax provisions relevant to businesses that will impact taxes related to 2018, 2019, and 2020. Some of the significant tax law changes are to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020, provide for the acceleration of depreciation expense from 2018 and forward on qualified improvement property, and accelerate the ability to claim refunds of Alternative Minimum Tax ("AMT") credit carryforwards. The Company is required to recognize the effect on the consolidated financial statements in the period the law was enacted, which is March 31, 2020. The Company is carrying back net operating losses generated in the June 30, 2019 tax year for five years, resulting in an estimated income statement benefit of $12,538, excluding the indirect tax benefit of $2,800 related to discontinued operations, and a tax refund receivable of $48,415 which is included as a component of Prepaid expenses and other current assets on the Consolidated Balance Sheets. The Company continues to assess the impact of the CARES Act and additional guidance that is released related to COVID-19.

The effective income tax rate from continuing operations was a benefit of 66.7% and expense of 24.7% for the three months ended March 31, 2020 and 2019, respectively. The effective income tax rate from continuing operations was a benefit of 72.8% and a benefit of 4.0% for the nine months ended March 31, 2020 and 2019, respectively. The effective income tax rate from continuing operations for the period ended March 31, 2020 was impacted by provisions of the CARES Act. The Company recorded an income statement benefit of $12,538 related to the net operating loss carryback provision of the CARES Act, net of a reserve under ASC 740-10, but excluding the indirect tax benefit of $2,800 related to discontinued operations. This benefit is primarily due to the Company's ability to realize net operating losses at 35% (previous Federal income tax rate), while the deferred tax asset was established at 21% (current Federal income tax rate). The effective income tax rates from continuing operations for all periods were impacted by provisions in the Tax Cuts and Jobs Act (the "Tax Act"), primarily related to Global Intangible Low Taxed Income and limitations on the deductibility of executive compensation. The effective income tax rates in each period were also impacted by the geographical mix of earnings.

The income tax from discontinued operations was a benefit of $1,624 and expense of $11,848 for the three and nine months ended March 31, 2020, respectively, while the income tax benefit from discontinued operations was $21,244 and $48,788 for the three and nine months ended March 31, 2019, respectively. The expense for income taxes for the nine months ended March 31, 2020 was impacted by $14,500 of tax related to the tax gain on the sale of the Tilda Group Entities. The benefit from income taxes for the three and nine months ended March 31, 2019 includes the reversal of the $12,250 deferred tax liability previously recorded related to Hain Pure Protein being classified as held-for-sale. Additionally, the three and nine month tax benefit is impacted by the tax effect of current period book losses as well as deferred tax benefit arising from asset impairment charges.