Income Taxes
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Jun. 30, 2013
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Income Taxes |
16. Income Taxes
Income from continuing operations before income taxes for the Company’s domestic and foreign operations was as follows:
The provision (benefit) for income taxes from continuing operations consisted of the following:
The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company’s effective income tax rate:
Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheet are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2013, the Company had state net operating loss carryforwards of $324.5 million expiring between 2014 and 2032. The valuation allowance increased from fiscal year 2012 by $1.1 million primarily due to a decrease in the amount of future reversals of taxable temporary differences.
At June 30, 2013, the Company had undistributed earnings of foreign subsidiaries, amounting to $122.9 million on which deferred income taxes have not been provided because earnings are expected to be reinvested indefinitely outside of the U.S. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and withholding taxes in various foreign tax jurisdictions. It is not practical to calculate these taxes due to the complex and hypothetical nature of the calculations.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for uncertain tax positions is as follows:
The liability for unrecognized tax benefits as of June 30, 2013 of $1.4 million includes $1.1 million of offsetting tax benefits for reversals of deferred tax items. The net amount of $0.3 million would, if recognized, favorably impact the Company’s effective tax rate. The net amounts at June 30, 2012 and 2011 were $0.8 million and $0.4 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefits will change within the next 12 months; however, any such changes should not have a significant impact on the Company’s consolidated financial statements.
It is the Company’s policy to classify interest and penalties recognized on uncertain tax positions as a component of income tax expense. The Company’s income tax expense included a benefit of $0.3 million, a charge of $0.4 million and a benefit of $0.3 million related to interest and penalties for the years ended June 30, 2013, 2012 and 2011, respectively. In addition, $0.6 million and $0.7 million were included in accrued income taxes in the consolidated balance sheet as of June 30, 2013 and 2012, respectively.
All years prior to June 30, 2009 have been settled with the Internal Revenue Service and with most significant state tax jurisdictions. The Company has not extended any statute of limitations period for any significant location in which it operates. Generally, tax years are open to examination for a period of four to six years following the filing of the tax returns.
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