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Income Taxes | 12 Months Ended
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Jun. 30, 2020
Income Taxes [Abstract] |
Income Taxes | (14) Income Taxes Income before income taxes for the years ended June 30, 2020, 2019 and 2018, was taxed under the following jurisdictions (in thousands):
|  | 2020 |  | 2019 |  | 2018
U.S. |  | $ | 60,548 |  | $ | (34,468) |  | $ | 42,627
Non-U.S. |  |  | 672,540 |  |  | 553,315 |  |  | 478,685
|  | $ | 733,088 |  | $ | 518,847 |  | $ | 521,312
The provision for income taxes is presented below (in thousands):
|  |  | 2020 |  | 2019 |  | 2018
Current: | Federal |  | $ | 9,790 |  | $ | 28,658 |  | $ | 128,971
| State |  |  | 6,898 |  |  | 7,595 |  |  | 948
| Non-U.S. |  |  | 124,602 |  |  | 127,540 |  |  | 68,858
|  |  |  | 141,290 |  |  | 163,793 |  |  | 198,777
Deferred: | Federal |  |  | (13,000) |  |  | (30,456) |  |  | 9,488
| State |  |  | (3,335) |  |  | (5,408) |  |  | (350)
| Non-U.S. |  |  | (13,541) |  |  | (13,674) |  |  | (2,191)
|  |  |  | (29,876) |  |  | (49,538) |  |  | 6,947
Provision for income taxes |  | $ | 111,414 |  | $ | 114,255 |  | $ | 205,724
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 21% for the years ended June 30, 2020 and June 30, 2019 and 28% for the year ended June 30, 2018, to pretax income as a result of the following (in thousands):
|  | 2020 |  | 2019 |  | 2018
Taxes computed at statutory U.S. rate |  | $ | 153,949 |  | $ | 108,958 |  | $ | 146,280
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |
Transition tax |  |  | - |  |  | 6,038 |  |  | 126,753
State income taxes, net of U.S. tax benefit |  |  | 3,563 |  |  | 2,186 |  |  | 2,427
Research and development credit |  |  | (13,595) |  |  | (12,953) |  |  | (4,089)
Change in statutory tax rates |  |  | - |  |  | - |  |  | 16,685
Change in valuation allowance |  |  | 7,216 |  |  | (1,118) |  |  | (2,962)
Effect of non-U.S. tax rates |  |  | (20,935) |  |  | 25,045 |  |  | (70,250)
Foreign tax credits (1) |  |  | (4,026) |  |  | (7,806) |  |  | (6,473)
Stock-based compensation expense |  |  | (20,696) |  |  | (11,534) |  |  | (7,045)
Other |  |  | 5,938 |  |  | 5,439 |  |  | 4,398
|  | $ | 111,414 |  | $ | 114,255 |  | $ | 205,724
(1) In fiscal year 2018, $75.5 million of the foreign tax credit is included as a reduction in the transition tax. The components of our deferred tax assets and liabilities at June 30, 2020 and June 30, 2019, are as follows (in thousands):
|  |  |  |  | 2020 |  | 2019
Deferred tax assets: |  |  |  |  |  |  |  |  |
Employee liabilities |  |  |  |  | $ | 21,272 |  | $ | 18,104
Tax credit carry overs |  |  |  |  |  | 9,295 |  |  | 15,666
Inventories |  |  |  |  |  | 9,129 |  |  | 4,905
Provision for warranties |  |  |  |  |  | 3,585 |  |  | 3,551
Provision for doubtful debts |  |  |  |  |  | 6,594 |  |  | 5,532
Net operating loss carryforwards |  |  |  |  |  | 38,035 |  |  | 53,315
Capital loss carryover |  |  |  |  |  | 10,864 |  |  | 6,640
Property, plant and equipment |  |  |  |  |  | (724) |  |  | 3,002
Stock-based compensation expense |  |  |  |  |  | 6,035 |  |  | 10,769
Deferred revenue |  |  |  |  |  | 15,343 |  |  | 9,619
Research and development capitalization |  |  |  |  |  | 39,195 |  |  | 17,910
Other |  |  |  |  |  | (2,282) |  |  | (332)
|  |  |  |  |  | 156,341 |  |  | 148,681
Less valuation allowance |  |  |  |  |  | (16,891) |  |  | (11,644)
Deferred tax assets |  |  |  |  |  | 139,450 |  |  | 137,037
Deferred tax liabilities: |  |  |  |  |  |  |  |  |
Goodwill and other intangibles |  |  |  |  |  | (111,396) |  |  | (102,939)
Deferred tax liabilities |  |  |  |  |  | (111,396) |  |  | (102,939)
Net deferred tax asset |  |  |  |  | $ | 28,054 |  | $ | 34,098
We reported the net deferred tax assets and liabilities in our consolidated balance sheets at June 30, 2020 and June 30, 2019, as follows (in thousands):
|  |  |  |  | 2020 |  | 2019
Non-current deferred tax asset |  |  |  |  | $ | 41,065 |  | $ | 45,478
Non-current deferred tax liability |  |  |  |  |  | (13,011) |  |  | (11,380)
Net deferred tax asset |  |  |  |  | $ | 28,054 |  | $ | 34,098
As of June 30, 2020, we had $30.4 million of U.S. federal and state net operating loss carryforwards and $6.8 million of non-U.S. net operating loss carryforwards, which expire in various years beginning in 2020 or carry forward indefinitely. The valuation allowance at June 30, 2020 relates to a provision for uncertainty of the utilization of net operating loss carryforwards of $1.6 million and capital loss and other items of $15.3 million. We believe that it is more likely than not that the benefits of deferred tax assets, net of any valuation allowance, will be realized. A substantial portion of our manufacturing operations and administrative functions in Singapore operate under various tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2030. The end of certain tax holidays may be extended if specific conditions are met. The net impact of these tax holidays and tax incentive programs increased our net earnings by $43.8 million ($0.30 per diluted share) for the year ended June 30, 2020 and $20.3 million ($0.14 per diluted share) for the year ended June 30, 2019. As a result of the U.S. Tax Act, we have treated all non-U.S. historical earnings as taxable, which resulted in additional tax expense of $126.9 million during the year ended June 30, 2018 and $6.0 million during the year ended June 30, 2019, which was payable over eight years. Therefore, future repatriation of cash held by our non-U.S. subsidiaries will generally not be subject to U.S. federal tax if repatriated. The total amount of these undistributed earnings at June 30, 2020 amounted to approximately $3.0 billion. On June 14, 2019, the U.S. Treasury Department issued final and temporary regulations relating to the repatriation of non-U.S. earnings. As a result, in the event our non-U.S. earnings had not been permanently reinvested, deferred taxes of approximately $194.4 million in U.S. federal deferred tax and $5.2 million in U.S. state deferred taxes would have been recognized in the consolidated financial statements. In accounting for uncertainty in income taxes, we recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (that is, a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for annual periods. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets. Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits on June 30, 2020, is not material to our results of operations, financial condition or cash flows, and if recognized, would not have a material impact on our effective tax rate. Our income tax returns are based on calculations and assumptions subject to audit by various tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws. We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes. Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results. In connection with the audit by the Australian Taxation Office (“ATO”) for the tax years 2009 to 2013, we received Notices of Amended Assessments in March 2018. Based on these assessments, the ATO asserted that we owe $151.7 million in additional income tax and $38.4 million in accrued interest, of which $75.9 million was paid in April 2018 under a payment arrangement with the ATO. In June 2018, we received a notice from the ATO claiming penalties of 50% of the additional income tax that was assessed or $75.9 million. As of June 30, 2020, we recorded a receivable in prepaid taxes and other non-current assets for the amount paid as we ultimately expect this will be refunded by the ATO. The ATO is currently auditing tax years 2014 to 2018. We do not agree with the ATO’s assessments and continue to believe we are more likely than not to be successful in defending our position. Our income tax expense, short-term income taxes payable and long-term income taxes payable were impacted by charges associated with the U.S. Tax Act enacted on December 22, 2017, which resulted in additional income tax expense of $138.0 million during the year ended June 30, 2018. Specifically, the income tax expense includes the transition tax imposed on our accumulated foreign earnings, which resulted in additional income tax expense of $126.9 million for the year ended June 30, 2018. Additionally, it resulted in the write down in the carrying value of our net deferred tax assets due to the lower corporate tax rate and the reduction in the future value of deferred tax assets, which resulted in additional income tax expense of $11.1 million recorded in the year ended June 30, 2018. During the year ended June 30, 2019, we recorded additional tax expense of $6.0 million in transition tax imposed on our accumulated foreign earnings, which related to final treasury regulations issued and temporary guidance published during the year. On December 22, 2017, the SEC issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. Tax Act as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. Effective December 31, 2018, the accounting relating to the impact of U.S. legislation was no longer considered provisional. During the year ended June 30, 2018, we recorded additional tax expense of $138.0 million relating to changes in U.S. tax legislation. During the year ended June 30, 2019, we recorded additional tax expense of $6.0 million in additional transition tax, which related to final treasury regulations issued and temporary guidance published during the year. However, further adjustments could be required as a result of future legislation, amended tax returns, or tax examinations of the years impacted by the calculation.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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