INCOME TAXES

6 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7: INCOME TAXES

We file a consolidated federal income tax return in the U.S. with the Internal Revenue Service (IRS) and file tax returns in various state, local, and foreign jurisdictions.

We had gross unrecognized tax benefits of $208.4 million and $240.1 million as of December 31, 2023 and June 30, 2023, respectively. The gross unrecognized tax benefits decreased by $31.7 million during the six months ended December 31, 2023 due to expiration of statutes of limitations and settlements with state tax authorities. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $117.4 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations and anticipated closure of various matters currently under examination or in appeals. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.

Our effective tax rate for continuing operations, including the effects of discrete tax items, was 28.9% and 25.2% for the six months ended December 31, 2023 and 2022, respectively. Discrete items increased the effective tax rate by 5.4% and 1.4% for the six months ended December 31, 2023, and 2022, respectively. A discrete income tax benefit of $26.6 million and $7.2 million were recorded in the six months ended December 31, 2023 and 2022, respectively. The discrete tax benefit recorded in the current period primarily resulted from settlements with tax authorities and state statute of limitations expirations. The discrete tax benefit recorded in the prior period primarily resulted from state statute of limitations expirations and refund interest. The impact of discrete tax items combined with the seasonal nature of our business can cause the effective tax rate in our second quarter to be significantly different than the rate for our full fiscal year.

Consistent with prior years, our pretax loss for the six months ended December 31, 2023 is expected to be offset by income in our third and fourth quarters due to the established pattern of seasonality in our primary business operations. As such, management has determined that it is more-likely-than-not that realization of tax benefits recorded in our financial statements will occur within our fiscal year. The amount of tax benefit recorded for the six months ended December 31, 2023 reflects management’s estimate of the annual effective tax rate applied to year-to-date loss from continuing operations adjusted for the tax impact of discrete items for the periods presented.