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Income Taxes | 9 Months Ended
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Jun. 30, 2022
Income Taxes |
Income Taxes | 10. Income Taxes ​ The Company’s effective tax rate was 26.0% and 16.6% for the nine months ended June 30, 2022 and 2021, respectively. The most significant items contributing to the difference between the statutory U.S. federal corporate tax rate of 21.0% and the Company’s effective tax rate for the nine-month period ended June 30, 2022 were a tax benefit of $36.4 million related to income tax credits and incentives, tax expense of $31.4 million related to foreign residual income, tax expense of $16.4 million related to state income taxes, tax expense of $15.7 million related to uncertain tax positions, tax expense of $11.9 million related to nondeductible costs, and tax benefit of $11.6 million related to changes in valuation allowances. All of these items are expected to have a continuing impact on the effective tax rate for the remainder of the fiscal year except for the one-time changes in valuation allowances and uncertain tax positions. ​ The most significant items contributing to the difference between the statutory U.S. federal corporate tax rate of 21.0% and the Company’s effective tax rate for the nine-month period ended June 30, 2021 were a tax benefit of $39.0 million related to income tax credits and incentives, a tax benefit of $25.9 million related to a corporate tax rate change in the United Kingdom, a tax expense of $30.7 million related to foreign residual income, a tax expense of $13.2 million related to an audit settlement, and a tax expense of $11.5 million related to state income taxes. ​ During the nine-month period ended June 30, 2022, valuation allowances in the amount of $21.9 million primarily related to net operating losses in certain foreign entities were released due to sufficient positive evidence obtained during the first quarter. The positive evidence included a realignment of the Company’s global transfer pricing methodology that was implemented during the first quarter which resulted in forecasting the utilization of the net operating losses within the foreseeable future. ​ During the nine-month period ended June 30, 2022, valuation allowances in the amount of $6.4 million on the net deferred tax assets of the Company’s Russia business were recorded due to the Company exiting all business operations in Russia. It is now more likely than not the net deferred tax assets will not be realized. ​ During the third quarter of fiscal 2021, the United Kingdom enacted a corporate tax rate increase from 19% to 25% beginning April 2023 requiring deferred tax assets and liabilities to be remeasured. The remeasurement resulted in a $25.9 million tax benefit. ​ During the third quarter of fiscal 2021, the Company partially settled its U.S. federal audit for fiscal 2015 and 2016 and recorded tax expense of $13.2 million due primarily to changes in tax attributes. ​ The Company is utilizing the annual effective tax rate method under ASC 740 to compute its interim tax provision. The Company’s effective tax rate fluctuates from quarter to quarter due to various factors including the change in the mix of global income and expenses, outcomes of administrative audits, changes in the assessment of valuation allowances due to management’s consideration of new positive or negative evidence during the quarter, and changes in enacted tax laws. The U.S.and many international legislative and regulatory bodies have proposed legislation that could significantly impact how our business activities are taxed. These proposed changes could have a material impact on the Company’s income tax expense and deferred tax balances. ​ The Company is currently under tax audit in several jurisdictions including the U.S. and believes the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in future adjustments, but will not result in a material change in the liability for uncertain tax positions. ​ Generally, the Company does not provide for U.S. taxes or foreign withholding taxes on gross book-tax differences in its non-U.S. subsidiaries because such basis differences of approximately $1.5 billion are able to and intended to be reinvested indefinitely. If these basis differences were distributed, foreign tax credits could become available under current law to partially or fully reduce the resulting U.S. income tax liability. There may also be additional U.S. or foreign income tax liability upon repatriation, although the calculation of such additional taxes is not practicable.

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