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Income Taxes | 12 Months Ended
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Jun. 30, 2021
Income Taxes [Abstract] |
Income Taxes | (14) Income Taxes Income before income taxes for the years ended June 30, 2021, 2020 and 2019, was taxed under the following jurisdictions (in thousands):
|  | 2021 |  | 2020 |  | 2019
U.S. |  | $ | 71,867 |  | $ | 60,548 |  | $ | (34,468)
Non-U.S. |  |  | 811,795 |  |  | 672,540 |  |  | 553,315
Income before income taxes |  | $ | 883,662 |  | $ | 733,088 |  | $ | 518,847
The provision for income taxes is presented below (in thousands):
|  |  | 2021 |  | 2020 |  | 2019
Current: | Federal |  | $ | (115,109) |  | $ | 9,790 |  | $ | 28,658
| State |  |  | 9,041 |  |  | 6,898 |  |  | 7,595
| Non-U.S. |  |  | 531,812 |  |  | 124,602 |  |  | 127,540
|  |  |  | 425,744 |  |  | 141,290 |  |  | 163,793
Deferred: | Federal |  |  | (22,791) |  |  | (13,000) |  |  | (30,456)
| State |  |  | (4,205) |  |  | (3,335) |  |  | (5,408)
| Non-U.S. |  |  | 10,409 |  |  | (13,541) |  |  | (13,674)
|  |  |  | (16,587) |  |  | (29,876) |  |  | (49,538)
Provision for income taxes |  | $ | 409,157 |  | $ | 111,414 |  | $ | 114,255
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, 2021, 2020 and 2019, to pretax income as a result of the following (in thousands):
|  | 2021 |  | 2020 |  | 2019
Taxes computed at statutory U.S. rate |  | $ | 185,569 |  | $ | 153,949 |  | $ | 108,958
Increase (decrease) in income taxes resulting from: |  |  |  |  |  |  |  |  |
State income taxes, net of U.S. tax benefit |  |  | 4,836 |  |  | 3,563 |  |  | 2,186
Research and development credit |  |  | (20,257) |  |  | (13,595) |  |  | (12,953)
Change in valuation allowance |  |  | (3,785) |  |  | 7,216 |  |  | (1,118)
Effect of non-U.S. tax rates |  |  | (12,130) |  |  | (20,935) |  |  | 25,045
Foreign tax credits |  |  | (7,210) |  |  | (4,026) |  |  | (7,806)
Stock-based compensation expense |  |  | (4,498) |  |  | (20,696) |  |  | (11,534)
Uncertain tax position |  |  | 248,773 |  |  | - |  |  | -
Transition tax |  |  | - |  |  | - |  |  | 6,038
Other |  |  | 17,859 |  |  | 5,938 |  |  | 5,439
Provision for income taxes |  | $ | 409,157 |  | $ | 111,414 |  | $ | 114,255
We reported net deferred tax assets and liabilities in our consolidated balance sheets at June 30, 2021 and June 30, 2020, as follows (in thousands):
|  |  |  |  | 2021 |  | 2020
Non-current deferred tax asset |  |  |  |  | $ | 79,904 |  | $ | 41,065
Non-current deferred tax liability |  |  |  |  |  | (11,319) |  |  | (13,011)
Net deferred tax asset |  |  |  |  | $ | 68,585 |  | $ | 28,054
The components of our deferred tax assets and liabilities at June 30, 2021 and June 30, 2020, are as follows (in thousands):
|  |  |  |  | 2021 |  | 2020
Deferred tax assets: |  |  |  |  |  |  |  |  |
Employee liabilities |  |  |  |  | $ | 30,080 |  | $ | 21,272
Tax credit carry overs |  |  |  |  |  | 13,753 |  |  | 9,295
Inventories |  |  |  |  |  | 11,734 |  |  | 9,129
Provision for warranties |  |  |  |  |  | 4,149 |  |  | 3,585
Provision for doubtful debts |  |  |  |  |  | 7,334 |  |  | 6,594
Net operating loss carryforwards |  |  |  |  |  | 33,377 |  |  | 38,035
Capital loss carryover |  |  |  |  |  | 6,912 |  |  | 10,864
Stock-based compensation expense |  |  |  |  |  | 6,080 |  |  | 6,035
Deferred revenue |  |  |  |  |  | 17,839 |  |  | 15,343
Research and development capitalization |  |  |  |  |  | 58,789 |  |  | 39,195
Lease liabilities |  |  |  |  |  | 25,751 |  |  | -
Other |  |  |  |  |  | (5,851) |  |  | (3,006)
|  |  |  |  |  | 209,947 |  |  | 156,341
Less valuation allowance |  |  |  |  |  | (13,106) |  |  | (16,891)
Deferred tax assets |  |  |  |  |  | 196,841 |  |  | 139,450
Deferred tax liabilities: |  |  |  |  |  |  |  |  |
Goodwill and other intangibles |  |  |  |  |  | (104,563) |  |  | (111,396)
Right of use assets |  |  |  |  |  | (23,693) |  |  | -
Deferred tax liabilities |  |  |  |  |  | (128,256) |  |  | (111,396)
Net deferred tax asset |  |  |  |  | $ | 68,585 |  | $ | 28,054
As of June 30, 2021, we had $25.1 million of U.S. federal and state net operating loss carryforwards and $7.6 million of non-U.S. net operating loss carryforwards, which expire in various years beginning in 2022 or carry forward indefinitely. The valuation allowance at June 30, 2021 relates to a provision for uncertainty of the utilization of net operating loss carryforwards of $0.8 million and capital loss and other items of $12.3 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 certain 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 income by $33.6 million ($0.23 per diluted share) for the year ended June 30, 2021, $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 Tax Cuts and Jobs Act of 2017 (the ”U.S. Tax Act”), we have treated all non-U.S. historical earnings as taxable, which resulted in additional tax expense of $6.0 million during the year ended June 30, 2019, which related to final treasury regulations issued and temporary guidance published during the year and is 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, 2021 amounted to approximately $3.2 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, approximately $202.6 million in U.S. federal deferred taxes and $5.1 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. We recognize 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. 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. We are under audit by the Australian Taxation Office (the “ATO”) for the years 2009 to 2018 (the “Audit Period”). The audits primarily involve a transfer pricing dispute in which the ATO asserts we should have paid additional Australian taxes on income derived from our Singapore operations. The ATO issued Notices of Amended Assessments for the tax years 2009 to 2013 seeking a total of $266.0 million, consisting of $151.7 million in additional income tax and $114.3 million in penalties and interest. The 2014 to 2018 periods are still under audit and we have not yet received any Notices of Amended Assessments relative to those periods. A total of $98.8 million in tax has been prepaid in relation to the Audit Period, which is consistent with ATO procedural audit practice. We are engaged in advanced discussions with the ATO to settle the dispute for the entire Audit Period. Given the stage of those discussions, during the year ended June 30, 2021, we recorded $395.3 million of gross unrecognized tax benefits, including $47.5 million of accrued interest and penalties. This amount reflects our estimate of the potential tax liability and is subject to change. Included in the balance of uncertain tax positions as of June 30, 2021 were $248.7 million of net unrecognized tax benefits that, if recognized, would reduce the effective income tax rate in future periods. This amount represents the $395.3 million of gross unrecognized tax, adjusted for tax credits and deductions of $146.6 million. If the matter were to progress to litigation, we continue to believe we are more likely than not to be successful in defending our position. If we are not successful in litigation, we will be required to pay some or all of the additional income tax, accrued interest and penalties, including potential additional amounts relating to the 2014 to 2018 periods. The timing and resolution of the ATO audits are inherently uncertain, and the amounts we might ultimately pay or receive in credits and deductions, if any, upon resolution of issues raised by the ATO may differ materially from the amounts accrued. Although it is expected that the amount of unrecognized tax benefits may change in the next 12 months, an estimate of the range of the possible change cannot be made. Outside the ATO audit described above, tax years 2017 to 2020 remain subject to future examination by the major tax jurisdictions in which we are subject to tax.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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