XML 25 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes
9 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
We recognize our deferred tax assets and liabilities based upon the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Further, we follow a methodology in which we identify, recognize, measure, and disclose in our financial statements the effects of any uncertain tax return reporting positions that we have taken or expect to take. The methodology is based on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances. Our quarterly effective income tax rate reflects management’s estimates of our annual projected profitability in the various taxing jurisdictions in which we operate. Since the statutory tax rates differ in the jurisdictions in which we operate, changes in the distribution of profits and losses may have a significant impact on our effective income tax rate.
For the three months ended March 31, 2017 and 2016, we had effective income tax rates of 27.6% and 28.6%, respectively. The tax rates for these periods were lower than the expected statutory rate of 35% primarily as a result of the favorable effect of statutory tax rates applicable to income earned outside the United States on the projected annual effective tax rate.
For the nine months ended March 31, 2017 and 2016, we had effective income tax rates of 32.1% and 27.7%, respectively. The tax rates for these periods were lower than the expected statutory rate of 35% primarily as a result of the favorable effect of statutory tax rates applicable to income earned outside the United States on the projected annual effective tax rate. The tax rate for the nine months ended March 31, 2017, benefited 3.0% from the adoption of ASU 2016-09 as discussed in Note 1 to these condensed consolidated financial statements, and increased by 4.9% due to the non-deductibility of the unrealized loss on the fair value adjustment of $20.7 million in connection with accelerated share repurchase program.
As of March 31, 2017, we had $29.7 million of gross unrecognized tax benefits, of which $19.1 million would impact the effective tax rate if recognized. As of June 30, 2016, we had $29.5 million of gross unrecognized tax benefits, of which $18.9 million would impact the effective tax rate if recognized. The reserves for unrecognized tax positions primarily relate to exposures for income tax matters such as changes in the jurisdiction in which income is taxable.
As of March 31, 2017, we do not anticipate that the liability for unrecognized tax benefits for uncertain tax positions could decrease significantly over the next 12 months primarily as a result of the expiration of statutes of limitations and settlements with tax authorities.
We recognize interest and penalties related to income tax matters in income tax expense. As of March 31, 2017 and June 30, 2016, $3.7 million and $3.4 million, respectively, of gross interest and penalties were included in the liability for unrecognized tax benefits. For the nine month periods ended March 31, 2017 and 2016, expenses of $0.4 million and $0.8 million, respectively, were recorded for interest and penalties related to tax matters.
We are subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. Our U.S. federal, state and local income tax returns for the tax years 2005 to 2016 remain open for examination by the relevant tax authority. In foreign tax jurisdictions, the Company has open tax years dating back to 2002. The extended open tax years for these jurisdictions resulted from tax attributes carryover including net operating losses or tax credits from those tax years.
We are subject to on-going tax audits in various jurisdictions.  Tax authorities may disagree with certain positions we have taken and assess additional taxes.  We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision and have established contingency reserves for material, known tax exposures.