
	Fiscal Year Ended June 30,
(Dollars in millions)	2019		2018		2017
Current:
Federal	$	2.4	$	14.1	$	2.1
State and local	0.3		0.1		(0.4)
Non-U.S.	25.8		24.9		22.7
Total current	$	28.5	$	39.1	$	24.4
Deferred:
Federal	$	3.6	$	24.2	$	1.9
State and local	(11.6)		(1.0)		1.4
Non-U.S.	2.4		6.1		(1.9)
Total deferred	$	(5.6)	$	29.3	$	1.4

Total provision	$	22.9	$	68.4	$	25.8

A reconciliation of the provision/(benefit) starting from the tax computed at the federal statutory income tax rate to the tax computed at the Company’s effective income tax rate is as follows for the fiscal years ended 2019, 2018, and 2017:


	Fiscal Year Ended June 30,
(Dollars in millions)	2019		2018		2017
Provision at U.S. federal statutory tax rate	$	33.7	$	42.7	$	47.4
State and local income taxes	(0.3)		(2.5)		(1.7)
Foreign tax rate differential	(3.0)		(15.4)		(25.7)
Global intangible low tax income	3.4		—		—
Other permanent items	4.9		2.7		2.9
Unrecognized tax positions	1.1		(2.4)		(0.3)
Tax valuation allowance	(11.3)		7.2		5.6
Foreign tax credit	(4.2)		—		—
Withholding tax and other foreign taxes	1.1		1.3		(0.2)
Change in tax rate	0.8		(3.6)		(0.3)

R&D tax credit	(2.3)		(2.4)		(1.2)
Impact of U.S. tax reform	—		42.5		—
Other	(1.0)		(1.7)		(0.7)
	$	22.9	$	68.4	$	25.8

The income tax provision for the fiscal year ended June 30, 2019 is not comparable to the provision in the prior year due to changes in pretax income over many jurisdictions and the impact of discrete items. Generally, fluctuations in the effective tax rate are primarily due to changes in the geographic mix of pretax income and changes in the tax impact of permanent differences and other discrete tax items, which may have unique tax implications depending on the nature of the item. The effective tax rate for the fiscal year ended June 30, 2019 reflects a reduction to the state valuation allowance, and the impact of permanent differences, including “global intangible low-taxed income” (“GILTI”), offset by the benefit of an increase in foreign earnings taxed at rates lower than the U.S. statutory rate. The effective tax rate for the fiscal year ended June 30, 2018 reflects the impact of U.S. tax reform, an increase in the valuation allowance, and the impact of permanent differences, offset by the benefit of an increase in foreign earnings taxed at rates lower than the U.S. statutory rate.

As of June 30, 2019, for purposes of ASC 740-10-25-3, the Company had $62.9 million of undistributed earnings from non-U.S. subsidiaries that are intended to be permanently reinvested in the Company's non-U.S. operations. As these ASC 740-10-25-3 earnings are considered permanently reinvested, no tax provision has been accrued. It is not feasible to estimate the amount of tax that might be payable on the eventual remittance of such earnings. The Company intends to repatriate foreign earnings previously taxed as a result of the changes wrought by the 2017 Tax Act and it recorded the income tax consequences of this repatriation in fiscal 2018.

Deferred income taxes arise from temporary differences between the financial reporting and tax reporting bases of assets and liabilities, and operating loss and tax credit carryforwards for tax purposes. The components of the Company's deferred income tax assets and liabilities are as follows at June 30, 2019 and 2018:


	Fiscal Year Ended June 30,
(Dollars in millions)	2019		2018
Deferred income tax assets:
Accrued liabilities	$	23.3	$	19.9
Equity compensation	35.9		12.9
Loss and tax credit carryforwards	150.0		118.9
Foreign currency	10.8		9.5
Pension	30.7		29.4
Property-related	9.7		9.7
Intangibles	16.6		22.5
Other	7.3		1.9
Euro-denominated debt	6.0		11.5
Total deferred income tax assets	$	290.3	$	236.2
Valuation allowance	(76.3)		(86.2)
Net deferred income tax assets	$	214.0	$	150.0


	Fiscal Year Ended June 30,
(Dollars in millions)	2019		2018
Deferred income tax liabilities:
Accrued liabilities	$	(1.2)	$	(0.8)

Foreign currency	(0.8)		(0.9)
Property-related	(47.4)		(50.2)
Goodwill and other intangibles	(194.6)		(95.6)
Other	(5.8)		(2.1)

Total deferred income tax liabilities	$	(249.8)	$	(149.6)

Net deferred tax asset/(liability)	$	(35.8)	$	0.4

At June 30, 2019, the Company had federal net operating loss (“NOL”) carryforwards of $240.9 million, all of which are subject to limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Of this amount, $0.3 million of NOL carryforwards were generated in years prior to April 10, 2007, when the Company was owned by Cardinal Health, Inc. (“Cardinal”). The remaining carryforwards are limited as a result of the Company's acquisition of Pharmatek, Juniper, and Paragon. The Company's federal NOL carryforwards will expire in fiscal years 2023 through 2037.

At June 30, 2019, the Company has state tax NOL carryforwards of $459.1 million. Approximately $49.4 million of these losses are state tax losses generated in periods ending on or before April 10, 2007. Substantially all state carryforwards have a twenty-year carryforward period. At June 30, 2019, the Company had international tax NOL carryforwards of $119.7 million. Substantially all of these carryforwards are available for at least three years or have an indefinite carryforward period.

The Company had valuation allowances of $76.3 million and $86.2 million as of June 30, 2019 and 2018, respectively, against its deferred tax assets. The Company considered all available evidence, both positive and negative, in assessing the need

The Company considered the need to maintain a valuation allowance on deferred tax assets based on management’s assessment of whether it is more likely than not that the Company would realize the value of its deferred tax assets based on future reversals of existing taxable temporary differences and the ability to generate sufficient taxable income within the carryforward period available under the applicable tax law. During the year ended June 30, 2019, the Company released $12.1 million of its valuation allowance related to certain U.S. combined states, primarily as a result of the deferred tax liability recorded related to the Paragon acquisition. Of the $12.1 million released, $0.5 million relates to state NOL carryforwards, which expire over a number of years beginning in 2028, and the remaining $11.6 million related to other state deferred taxes.

While the valuation allowance related to certain U.S. combined states was partially released in year end June 30, 2019, a state valuation allowance of $35.1 million was maintained on state NOLs and temporary differences for the separate and remaining combined states. The Company retained the remaining state valuation allowance due to its separate state history of tax losses, anticipated loss utilization rates and the difference in application of allocated and apportioned income rules for separate states versus combined states.

In the normal course of business, the Company's income taxes are subject to audits by federal, state, and foreign tax authorities, some of which are ongoing and may result in proposed assessments. Among the foreign jurisdictions where the Company has substantial tax positions are Germany, the U.K., and France. The Company is no longer subject to examinations by the relevant tax authorities for years prior to fiscal 2009. The Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental. The Company assesses its income tax positions and recorded benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions for which it is more likely than not that a tax benefit will be sustained, the Company records the amount that has a greater than 50% likelihood of being realized upon resolution with a taxing authority that has full knowledge of all relevant information based on the technical merits. Interest and penalties are accrued, where applicable.


(Dollars in millions)
Balance at June 30, 2016	$	61.5
Additions based on tax positions related to the current year	3.3
Additions for tax positions of prior years	0.1
Reductions for tax positions of prior years	(6.8)
Settlements	(5.4)
Lapse of the applicable statute of limitations	(0.2)
Balance at June 30, 2017	$	52.5
Additions based on tax positions related to the current year	0.1
Additions for tax positions of prior years	—
Reductions for tax positions of prior years	(2.7)
Settlements	(47.5)
Lapse of the applicable statute of limitations	(0.2)
Balance at June 30, 2018	$	2.2
Additions based on tax positions related to the current year	—
Additions for tax positions of prior years	3.0
Reductions for tax positions of prior years	(0.1)
Settlements	—
Lapse of the applicable statute of limitations	(1.3)
Balance at June 30, 2019	$	3.8

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2019, the Company has $1.4 million of accrued interest related to uncertain tax positions, a decrease of $0.6 million from the prior year, the majority of which relates to lapses of the applicable statute of limitations with respect to the imposition of such interest. The Company had $2.0 million and $5.0 million of accrued interest related to uncertain tax positions as of June 30, 2018 and 2017, respectively. The portion of such interest and penalties subject to indemnification by Cardinal is $1.3 million as of June 30, 2019, a decrease of $0.2 million from the prior year.