INCOME TAXES

6 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Effective Tax Rate

The effective tax rates for the second quarter and first 26 weeks of fiscal 2023 were 20.88% and 21.54%, respectively. The second quarter was favorably impacted by the benefit of the pension buyout of $4.9 million and excess benefits of equity-based compensation, which totaled $1.4 million. The first 26 weeks of fiscal 2023 were favorably impacted by excess tax benefits of equity-based compensation, which totaled $10.3 million.

The effective tax rates for the second quarter and first 26 weeks of fiscal 2022 were 21.27% and 24.18%, respectively. The effective tax rate for the second quarter and first 26 weeks of fiscal 2022 was impacted by the increase in our reserve for uncertain tax positions of $12.0 million in the first quarter, partially offset by (1) the favorable impact of excess tax benefits of equity-based compensation that totaled $1.4 million and $2.9 million, respectively, and (2) the impact of corporate-owned life insurance policies that totaled an unfavorable $1.0 million in the second quarter and a favorable $1.0 million in the first 26 weeks of fiscal 2022.

Uncertain Tax Positions

As of December 31, 2022, the gross amount of unrecognized tax benefit and related accrued interest was $32.4 million and $7.0 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next 12 months. At this time, an estimate of the range of the reasonably possible change cannot be made.

Other

The Inflation Reduction Act of 2022 (Inflation Reduction Act) was enacted on August 16, 2022. The Inflation Reduction Act imposes a new 15% corporate alternative minimum tax (CAMT) on “applicable corporations” for taxable years beginning after December 31, 2022. The CAMT is imposed to the extent the alternative minimum tax exceeds a corporation’s regular tax liability. A corporation that pays alternative minimum tax is eligible for a credit against income tax in future years. Subject to future regulatory guidance, the company does not currently believe the CAMT will have a material impact on its 2023 tax liability.

The determination of the company’s provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects income earned and taxed in the various United States (U.S.) federal and state, as well as foreign jurisdictions. Tax law changes, increases or decreases in permanent book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.