The effective tax rate increased to a provision of 52.2% for the year ended June 30, 2021, compared to a provision of 32.1% for the year ended June 30, 2020. Tax expense increased by $229.1 million from $110.8 million during the year ended June 30, 2020 to $339.9 million during the year ended June 30, 2021. This was primarily due to (i) an increase of $300.5 million relating to the IRS Settlement, (ii) an increase of $76.4 million relating to higher net income including the impact of foreign rates and (iii) an increase of $7.0 million related to the one-time benefit from the US CARES Act in Fiscal 2020 that did not recur in Fiscal 2021. These were partially offset by (i) a decrease of $66.9 million for changes in unrecognized tax benefits, (ii) a decrease of $34.1 million related to tax benefits of internal reorganizations that occurred in Fiscal 2021 (iii) a decrease of $33.2 million related to the US Base Erosion Anti-Abuse Tax (US BEAT), (iv) a decrease of $5.7 million for net changes in valuation allowance, (v) a decrease of $3.1 million related to permanent differences and (vi) a decrease of $3.1 million related to differences in tax filings being higher than estimates. The remainder of the difference was due to normal course movements and non-material items.


	Year Ended June 30,
	2021			2020			2019
Expected statutory rate	26.50		%	26.50		%	26.50		%
Expected provision for income taxes	$	172,454		$	91,479		$	116,752
Effect of foreign tax rate differences	(4,309)			218			(1,344)
Change in valuation allowance	(5,900)			(222)			(5,045)
Effect of permanent differences	(1,885)			1,215			(577)
Effect of changes in unrecognized tax benefits	(86,170)			(19,284)			31,992
Effect of withholding taxes	8,500			8,036			2,097
Difference in tax filings from provision	(2,162)			933			(250)
Effect of tax credits for research and development	(16,086)			(14,947)			(13,550)
Effect of accrual for undistributed earnings	3,209			4,233			(13,112)
Effect of US BEAT	7,967			41,207			16,030
Effect of CARES Act	—			(7,009)			—
Effect of IRS Settlement	300,460			—			—
Impact of internal reorganization of subsidiaries	(33,676)			451			16,471
Other Items	(2,496)			4,527			5,473
	$	339,906		$	110,837		$	154,937


	Year Ended June 30,
	2021		2020		2019
Current income taxes (recoveries):
Domestic	$	310,615	$	12,547	$	7,862
Foreign	(43,748)		46,902		99,650
	266,867		59,449		107,512
Deferred income taxes (recoveries):
Domestic	111,232		68,580		52,889
Foreign	(38,193)		(17,192)		(5,464)
	73,039		51,388		47,425
Provision for (recovery of) income taxes	$	339,906	$	110,837	$	154,937

As of June 30, 2021, we have $305.7 million of domestic non-capital loss carryforwards. In addition, we have $413.0 million of foreign non-capital loss carryforwards of which $73.1 million have no expiry date. The remainder of the domestic and foreign losses expire between 2022 and 2039. In addition, investment tax credits of $59.3 million will expire between 2022 and 2041.


	As of June 30,
	2021		2020
Deferred tax assets
Non-capital loss carryforwards	$	174,486	$	208,248
Capital loss carryforwards	5,570		152
Undeducted scientific research and development expenses	197,791		160,354
Depreciation and amortization	391,974		415,516
Restructuring costs and other reserves	24,919		21,999
Deferred revenue	11,388		60,026
Other	73,236		76,031
Total deferred tax asset	$	879,364	$	942,326
Valuation allowance	$	(72,888)	$	(81,810)
Deferred tax liabilities
Scientific research and development tax credits	$	(15,080)	$	(14,361)
Other	(102,882)		(83,328)
Deferred tax liabilities	$	(117,962)	$	(97,689)
Net deferred tax asset	$	688,514	$	762,827
Comprised of:
Long-term assets	796,738		911,565
Long-term liabilities	(108,224)		(148,738)
	$	688,514	$	762,827

We believe that sufficient uncertainty exists regarding the realization of certain deferred tax assets that a valuation allowance is required. We continue to evaluate our taxable position quarterly and consider factors by taxing jurisdiction, including but not limited to factors such as estimated taxable income, any historical experience of losses for tax purposes and the future growth of OpenText.


Unrecognized tax benefits as of June 30, 2019	$	209,242
Increases on account of current year positions	7,296
Increases on account of prior year positions	17,853
Decreases due to settlements with tax authorities	(20,457)
Decreases due to lapses of statutes of limitations	(18,853)
Unrecognized tax benefits as of June 30, 2020	$	195,081
Increases on account of current year positions	1,279
Increases on account of prior year positions	773
Decreases due to settlements with tax authorities	(158,070)
Decreases due to lapses of statutes of limitations	(2,314)
Unrecognized tax benefits as of June 30, 2021	$	36,749

Included in the above tabular reconciliation are unrecognized tax benefits of $6.7 million relating to deferred tax assets in jurisdictions in which these deferred tax assets are offset with valuation allowances. The net unrecognized tax benefit excluding these deferred tax assets is $29.9 million as of June 30, 2021 (June 30, 2020—$180.0 million).

We believe that it is reasonably possible that the gross unrecognized tax benefits, as of June 30, 2021, could decrease tax expense in the next 12 months by $3.8 million, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions.

Our four most significant tax jurisdictions are Canada, the United States, Luxembourg and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The earliest fiscal years open for examination are 2012 for Germany, 2010 for the United States, 2015 for Luxembourg, and 2012 for Canada.

We are subject to tax audits in all major taxing jurisdictions in which we operate and currently have tax audits open in Canada, the United States, Germany, India, Austria, Italy, France, and the Philippines. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the United States and Canada audits are included in note 14 "Guarantees and Contingencies".

The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain tax audits, please refer to note 14 "Guarantees and Contingencies".

On December 21, 2020, we entered into a closing agreement with the IRS resolving all of the proposed adjustments to our taxable income for Fiscal 2010 and Fiscal 2012. As a result, we recorded charges of $300.5 million during the year ended June 30, 2021 to "Provision for (recovery of) income taxes". The IRS Settlement also eliminates approximately $90 million in future withholding taxes that we had expected to incur over the next 10 years. We believe the IRS Settlement to be in the best interest of all stakeholders, as it closes all past, present and future items related to this matter. The IRS Settlement provides finality to this longstanding matter. During the year ended June 30, 2021, we made payments of $299.6 million associated with the IRS Settlement. As of June 30, 2021, the outstanding settlement amount of approximately $0.9 million is recorded within "Income taxes payable" in our Consolidated Balance Sheets. Please refer to note 14 "Guarantees and Contingencies" for additional details.

As of June 30, 2021, we have recognized a provision of $27.5 million (June 30, 2020—$24.8 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.