Income Taxes

3 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur. The annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pre-tax income, or loss, of the Company in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year. In addition, the Company's tax expense or benefit can be impacted by changes in tax rates or laws, the finalization of tax audits, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

Income tax expense was $8.4 million, or 16.1 percent of pre-tax income for the three months ended September 30, 2023, as compared with income tax benefit of $0.9 million, or 11.5 percent of pre-tax loss for the three months ended September 30, 2022.

Income tax expense for the three months ended September 30, 2023, includes a discrete tax benefit of $4.1 million attributable to employee share-based compensation. Also included is the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized. Income tax benefit for the three months ended September 30, 2022, included a discrete tax charge of $0.6 million for the impact of a state tax legislative change and a discrete tax benefit of $0.3 million attributable to employee share-based compensation. Also included is the unfavorable impact of losses in certain foreign jurisdictions for which no tax benefit can be recognized.

On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework expected by calendar year 2024. The Company is continuing to evaluate the Pillar Two Framework and its potential impact on future periods.