Income Taxes

3 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective income tax rates for the three months ended September 30, 2023 and 2022 were 21.0 percent and 27.5 percent, respectively. The year-over-year change is primarily due to a $6.2 million benefit associated with a change in unrecognized tax benefits which was partially offset by a $2.9 million charge to settle the Italian tax litigation and geographical mix.

Italian Income Tax Litigation Settlement

In 2012, we received an assessment from the Italian tax authority that denied certain tax deductions primarily related to our 2008 tax return. Attempts at negotiating a reasonable settlement with the tax authority were unsuccessful; and as a result, we decided to litigate the matter which was eventually settled during the current quarter. We continue to believe the assessment was baseless and that our 2008 tax return was compliant, in all material respects, with Italian income tax rules and regulations. Accordingly, no income tax liability had been recorded in connection with this assessment in any period. If the Italian tax authority had been successful in litigation, payment of the assessment amount at its face on September 30, 2023 would have resulted in an increase to income tax expense for as much as €35.7 million, or $37.9 million, of which penalties and interest would have been €21.0 million, or $22.3 million.

During fiscal 2023, the Italian government launched a tax amnesty program aimed at reducing the number of tax disputes pending before the Italian courts. Pursuant to program guidelines, payments made to successfully resolve a dispute had to be received by the Italian government no later than September 30, 2023. Due to the prolonged amount of time the case had been pending, and the inherent costs and risks of further litigating the matter, we decided to negotiate a settlement with the Italian tax authority that resulted in an income tax charge of $2.9 million in the current quarter. With this settlement, we consider the matter to be officially closed.