Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Earnings before income taxes shown below are based on the geographic location to which such earnings are attributable.

Years ended June 30,	2022		2021		2020
Earnings before income taxes:
United States	$	3,461.8	$	3,010.9	$	2,815.4
Foreign	342.3		350.3		367.2
	$	3,804.1	$	3,361.2	$	3,182.6

The provision (benefit) for income taxes consists of the following components:

Years ended June 30,	2022		2021		2020
Current:
Federal	$	620.7	$	749.3	$	468.3
Foreign	97.5		121.9		119.5
State	100.4		142.6		102.3
Total current	818.6		1,013.8		690.1
Deferred:
Federal	20.7		(182.6)		23.7
Foreign	(12.9)		(19.1)		(5.4)
State	28.8		(49.4)		7.7
Total deferred	36.6		(251.1)		26.0
Total provision for income taxes	$	855.2	$	762.7	$	716.1

A reconciliation between the Company's effective tax rate and the U.S. federal statutory rate is as follows:

Years ended June 30,	2022		%	2021		%	2020		%
Provision for taxes at U.S. statutory rate	$	798.9	21.0	$	705.9	21.0	$	668.4	21.0
Increase/(decrease) in provision from:
State taxes, net of federal tax benefit	91.8		2.4	67.2		2.0	85.6		2.7
Valuation allowance release on foreign tax credits	—		—	—		—	(20.3)		(0.6)
Foreign rate differential	41.3		1.1	34.0		1.0	44.9		1.4
Excess tax benefit - Stock-based compensation	(19.9)		(0.5)	(8.8)		(0.2)	(26.9)		(0.8)
Other	(56.9)		(1.5)	(35.6)		(1.1)	(35.6)		(1.2)
	$	855.2	22.5	$	762.7	22.7	$	716.1	22.5

The effective tax rate in fiscal 2022 and 2021 was 22.5% and 22.7%, respectively. The decrease in the effective tax rate is primarily due to a favorable earnings mix, lower reserves for uncertain tax positions, and an intercompany transfer of certain assets in fiscal 2022, partially offset by favorable adjustments to prior year tax liabilities and a foreign tax election in fiscal 2021.

The effective tax rate for fiscal 2021 and 2020 was 22.7% and 22.5%, respectively. The increase in the effective tax rate is primarily due to combined benefits from a valuation allowance release related to foreign tax credit carryforwards and a foreign tax law change during fiscal 2020 as well as a decrease in the excess tax benefit on stock-based compensation, partially offset by favorable adjustments to prior year tax liabilities during fiscal 2021.

The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:

Years ended June 30,	2022		2021
Deferred tax assets:
Accrued expenses not currently deductible	$	212.1	$	244.2
Stock-based compensation expense	43.5		38.4
Foreign tax credits	5.9		21.3
Net operating losses	34.1		46.3
Prepaid royalty	33.7		—
Unrealized investment losses, net	407.2		—
Other	38.3		34.7
	774.8		384.9
Less: valuation allowances	(18.9)		(13.4)
Deferred tax assets, net	$	755.9	$	371.5
Deferred tax liabilities:
Deferred revenue	$	529.9	$	494.5
Fixed and intangible assets	6.5		119.4
Prepaid expenses	94.8		27.9
Prepaid retirement benefits	4.6		37.7
Unrealized investment gains, net	—		101.7
Tax on unrepatriated earnings	11.5		11.4
Other	18.2		13.6
Deferred tax liabilities	665.5		806.2
Net deferred tax (assets)/liabilities	$	(90.4)	$	434.7

There are $157.4 million and $48.3 million of long-term deferred tax assets included in other assets on the Consolidated Balance Sheets at June 30, 2022 and 2021, respectively.

Income taxes have not been provided on undistributed earnings of certain foreign subsidiaries in an aggregate amount of approximately $53.0 million as the Company considers such earnings to be permanently reinvested outside of the United States. As of June 30, 2022, it is not practicable to estimate the unrecognized tax liability that would occur upon distribution.

The Company has estimated foreign net operating loss carry-forwards of approximately $55.1 million as of June 30, 2022, of which $1.5 million expire through June 2032 and $53.6 million have an indefinite utilization period. As of June 30, 2022, the Company has approximately $23.8 million of federal net operating loss carry-forwards from acquired companies. The net operating losses have an annual utilization limitation pursuant to section 382 of the Internal Revenue Code and expire through June 2036.

The Company has state net operating loss carry-forwards of approximately $204.2 million as of June 30, 2022, which expire through June 2041. The Company has recorded valuation allowances of $18.9 million and $13.4 million at June 30, 2022 and 2021, respectively, to reflect the estimated amount of domestic and foreign deferred tax assets that may not be realized.

Income tax payments were approximately $856.8 million, $973.7 million, and $677.1 million for fiscal 2022, 2021, and 2020, respectively.

As of June 30, 2022, 2021, and 2020 the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $98.1 million, $99.9 million, and $62.3 million respectively. The amount that, if recognized, would impact the effective tax rate is $68.1 million, $68.5 million, and $49.9 million, respectively. The remainder, if recognized, would principally impact deferred taxes.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

	2022		2021		2020
Unrecognized tax benefits at beginning of the year	$	99.9	$	62.3	$	54.2
Additions for tax positions	8.0		18.8		13.2
Additions for tax positions of prior periods	11.6		32.5		6.3
Reductions for tax positions of prior periods	(8.5)		(11.0)		(4.3)
Settlement with tax authorities	(2.0)		(1.3)		(4.0)
Expiration of the statute of limitations	(9.2)		(1.5)		(2.8)
Impact of foreign exchange rate fluctuations	(1.7)		0.1		(0.3)
Unrecognized tax benefit at end of year	$	98.1	$	99.9	$	62.3

Interest expense and penalties associated with uncertain tax positions have been recorded in the provision for income taxes on the Statements of Consolidated Earnings. During the fiscal years 2022, 2021, and 2020, the Company recorded interest expense of $3.5 million, $10.8 million, and $1.6 million, respectively. Penalties recorded during fiscal years 2022 and 2020 were not significant. During fiscal year 2021, the Company recorded penalties of $0.3 million.

At June 30, 2022, the Company had accrued interest of $21.9 million recorded on the Consolidated Balance Sheets, of which $4.5 million was recorded within income taxes payable, and the remainder was recorded within other liabilities. At June 30, 2021, the Company had accrued interest of $19.2 million recorded on the Consolidated Balance Sheets, of which $3.9 million was recorded within income taxes payable, and the remainder was recorded within other liabilities. At June 30, 2022 and June 30, 2021, the Company’s accrued penalties of $0.3 million and $0.3 million, respectively, were recorded on the Consolidated Balance Sheets within income taxes payable.

The Company is routinely examined by the IRS and tax authorities in foreign countries in which it conducts business, as well as tax authorities in states in which it has significant business operations. The tax years currently under examination vary by jurisdiction. Examinations in progress in which the Company has significant business operations are as follows:

Taxing Jurisdiction	Fiscal Years under Examination
Illinois	2019 - 2020
Arizona	2018 - 2020
Massachusetts	2013 - 2014, 2016 - 2018
New York State	2016 - 2018
New York City	2016 - 2018
India	2011, 2014 - 2020

The Company regularly considers the likelihood of assessments resulting from examinations in each of the jurisdictions. The resolution of tax matters is not expected to have a material effect on the consolidated financial condition of the Company, although a resolution could have a material impact on the Company's Statements of Consolidated Earnings for a particular future period and on the Company's effective tax rate.

If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions. Based on current estimates, settlements related to various jurisdictions and tax periods could increase earnings up to $2 million and expected cash payments could be up to $15 million in the next twelve months. The liability related to cash payments expected to be paid within the next 12 months has been reclassified from other liabilities to current liabilities on the Consolidated Balance Sheets. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a revision become known.