Income Taxes

9 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment.  The Company is currently under examination by the Internal Revenue Service for the year 2015, one state jurisdiction for the years 2015 through 2017 and one foreign jurisdiction for the years 2011 through 2015.  The Company does not expect resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows.

The Company’s total liability for unrecognized tax benefits as of March 31, 2019 and June 30, 2018 was $4.4 million and $4.1 million, respectively. The $4.4 million unrecognized tax benefit at March 31, 2019, if recognized, would impact the Company’s effective tax rate.

For the three months ended March 31, 2019, the effective income tax rate was 16.3 percent compared with 31.6 percent for the same period last year.  The Company’s effective income tax rate decreased primarily due to: the full-year impact of the lower U.S. income tax rate pursuant to the Tax Cuts and Jobs Act of 2017 (TCJA); writing off certain historic deferred tax balances due to an internal reorganization related to the integration of an acquired company; and from changes in our estimated benefit from the federal research and development tax credit.  For both comparative reporting periods, the Company’s effective tax rate was impacted by excess tax benefits under ASU 2016-09, Stock Compensation, and the change in value of assets invested in COLI policies. If gains or losses on the COLI investments throughout the rest of the current fiscal year vary from our estimates, our FY2019 effective tax rate will fluctuate in future quarters for the year ending June 30, 2019.

For the nine months ended March 31, 2019, the effective income tax rate was 18.7 percent compared with (9.6) percent for the same period last year. For the nine months ended March 31, 2019, the Company’s effective income tax rate increased year-over-year due to the favorable remeasurement of the Company's deferred tax liability pursuant to the TCJA in the prior year, partially offset by: the full-year impact of the lower U.S. income tax rate pursuant to the TCJA; writing off certain historic deferred tax balances due to an internal reorganization related to the integration of an acquired company; and from changes in our estimated benefit from the federal research and development tax credit.  For both comparative reporting periods, the Company’s effective tax rate was impacted by excess tax benefits under ASU 2016-09 and the change in value of assets invested in COLI policies. If gains or losses on the COLI investments throughout the rest of the current fiscal year vary from our estimates, our FY2019 effective tax rate will fluctuate in future quarters for the year ending June 30, 2019.  

Tax Cuts and Jobs Act

The TCJA was enacted on December 22, 2017.  Among other things, the TCJA reduced the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent effective January 1, 2018. Prior to the expiration of the one-year measurement period of Staff Accounting Bulletin No. 118 on December 22, 2018, the Company finalized its tax reform positions related to: (1) transition tax liability; (2) remeasurement of deferred taxes; and (3) the limitation on the deductibility of certain executive compensation. In prior periods, the Company was able to make reasonable estimates and record provisional amounts for each of these elements.  

During the nine months ended March 31, 2019, the Company recognized a $2.2 million tax benefit related to the reduction of our provisional calculation of the one-time transition tax liability and a $0.5 million tax benefit related to its final analysis of its deferred tax remeasurement.  No other adjustments were made to FY2018 provisional amounts during the nine months ended March 31, 2019.