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Income Taxes
9 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
The effective tax rate for the periods presented is primarily the result of income earned in the U.S. taxed at U.S. federal and state statutory income tax rates, income earned in foreign tax jurisdictions taxed at the applicable rates, as well as the impact of permanent differences between book and tax income, primarily the Foreign Derived Intangible Income (“FDII”) deduction.
Assuming certain requirements are met, the FDII deduction is a benefit for U.S. companies that sell their products or services to customers outside the U.S.

Our effective tax rate was 17.6% and 15.2% during the three months ended March 31, 2021 and 2020, respectively, and 17.3% and 13.4% during the nine months ended March 31, 2021 and 2020, respectively. Our effective tax rate was lower in the three months ended March 31, 2020 due to the higher FDII deduction taken last year compared to this year, and lower in the nine months ended March 31, 2020 as a result of the tax contingency reversal due to settling an IRS audit.

We recognized an income tax expense of $13.3 million and $7.5 million during the three months ended March 31, 2021 and 2020, respectively, and $47.1 million and $20.9 million during the nine months ended March 31, 2021 and 2020, respectively. Our income tax expense was driven primarily by pre-tax profitability in our domestic and foreign operations and the impact of permanent items. The permanent items are predominantly the FDII deduction, stock-based compensation expense and tax credits for research expenditures.

Deferred income taxes are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the timing of the temporary differences becoming deductible. Management considers, among other available information, scheduled reversals of deferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making this assessment.