Income Taxes

9 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The Company recorded an income tax provision of $9.4 million and $20.4 million, respectively, during the three and nine months ended June 30, 2021. The tax provision for the three months ended June 30, 2021 was primarily driven by the provision on earnings from operations during the period. The provision was partially offset by a $1.5 million benefit from the reversal of uncertain tax positions during the period. The provision for the nine months ended June 30, 2021 was primarily driven by the provision on earnings from operations during the period and was partially offset by a $2.7 million discrete stock compensation windfall benefit for tax deductions that exceeded the associated book compensation expense.

The Company recorded an income tax provision of $5.1 million and $5.6 million, respectively, during the three and nine months ended June 30, 2020. The tax provision for the three months ended June 30, 2020 was primarily driven by the provision on earnings from operations during the period. The tax provision for the nine months ended June 30, 2020 was primarily driven by the provision on earnings from operations during the period. The tax provision was offset by a $6.1 million discrete stock compensation windfall benefit for tax deductions that exceeded the associated compensation expense in the period. During the nine months ended June 30, 2020, the Company also recorded a discrete benefit of $0.5 million from a reduction of deferred tax liabilities related to the extension of a tax rate incentive in China.

During March 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act which contains numerous income tax provisions among other tax and non-tax provisions. Some of these income tax provisions have retroactive effects on years before the date of enactment. During December 2020, the United States enacted the

Consolidated Appropriations Act 2021 which also contains numerous income tax provisions among other tax and non-tax provisions. During March 2021, the United States enacted the American Rescue Plan Act of 2021. The Company evaluated the legislation of all three Acts in relation to income taxes and determined that the income tax Acts do not have a material impact on its income tax provision.

The Company evaluates the realizability of its deferred tax assets by tax-paying component and assesses the need for a valuation allowance on a quarterly basis. The Company evaluates the profitability of each tax-paying component on a historic cumulative basis and a forward-looking basis while performing this analysis. The Company maintains a U.S. valuation allowance related to the realizability of certain state tax credits and state net operating loss carry-forwards, as well as a valuation allowance against net deferred tax assets on certain foreign tax-paying components as of June 30, 2021.

The Company maintains liabilities for uncertain tax positions. These liabilities involve judgment and estimation and are monitored based on the best information available. The Company recognizes interest related to unrecognized tax benefits as a component of the income tax provision or benefit. The Company recognized interest expense related to its uncertain tax positions of $0.3 million and $0.8 million, respectively, during the three and nine months ended June 30, 2021.

The Company is subject to U.S. federal, state, local and foreign income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files.

In the normal course of business, the Company is subject to income tax audits in various global jurisdictions in which it operates. The years subject to examination vary for the U.S. and international jurisdictions, with the earliest tax year being 2013. Based on the outcome of these examinations or the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the Company’s Consolidated Balance Sheets. The Company currently anticipates that it is reasonably possible that the unrecognized tax benefits and accrued interest on those benefits will be reduced by an amount of $17.2 million in the next 12 months due to statute of limitations expirations. These unrecognized tax benefits would impact the effective tax rate if recognized.