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INCOME TAXES | 12 Months Ended
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Jun. 30, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 19. INCOME TAXES Tax Cuts and Jobs Act The Tax Cuts and Jobs Act (the “TCJA”) was enacted on December 22, 2017. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent effective on January 1, 2018. The rate change is administratively effective at the beginning of our fiscal year, using a blended rate for the annual period. As a result, the blended federal statutory tax rate for the year is 28.06 percent. Additionally, the TCJA requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, creates new taxes on certain foreign-sourced earnings and changes or limits certain tax deductions and credits. At June 30, 2018, we have not completed our accounting for the tax effects of enactment of the TCJA; however, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax. For these items we recognized provisional amounts in income tax expense benefit as discussed below. We remeasured deferred tax asset and liability balances at December 22, 2017 based on the rates at which they are expected to reverse in the future, which is generally 21.0 percent for reversals after FY2018 and a blended rate of 28.06 percent for reversals within FY2018. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our net deferred tax liabilities was a reduction to income tax expense of $96.3 million for the year ended June 30, 2018. This amount reflects an increased benefit of $1.5 million from the $94.8 million benefit recorded at December 31, 2017. This increased benefit is due to the Company’s ability to more precisely analyze the original assumptions made in its computation of deferred tax revaluation on December 22, 2017, as well as new activity since enactment of the TJCA that required revaluation. The one-time transition tax is based on our total post-1986 earnings and profits (“E&P”) for which we have previously deferred from U.S. income taxes. We recorded a provisional amount for our one-time transition tax liability for our foreign subsidiaries, resulting in an increase in income tax expense of $9.7 million for the year ended June 30, 2018. This amount is unchanged from prior periods. The Company expects to pay this amount over eight years. We have not yet completed our calculation of the total post-1986 foreign E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax and any additional outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. The overall impact of the TCJA on our results of operations was a $103.3 million reduction to tax expense for the year ended June 30, 2018. The corresponding increase in diluted earnings per share was $4.09 for the year ended June 30, 2018. The Company will continue to analyze the TCJA to determine the full effects of the new law, including the new lower corporate tax rate, international provisions, and the impact of the TCJA on the executive compensation limitations on its financial condition and results of operations. Additionally, the Company will continue to monitor various state law changes in reaction to the TCJA as changes are enacted. We expect to finalize the tax benefit from the TCJA with the filing of our tax return and record the difference between the final benefit and the provisional benefit recorded before the measurement period ends on December 22, 2018. The domestic and foreign components of income before provision for income taxes are as follows (in thousands):
|  | Year ended June 30, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Domestic |  | $ | 279,360 |  |  | $ | 231,982 |  |  | $ | 207,641 |
Foreign |  |  | 19,304 |  |  |  | 16,637 |  |  |  | 15,971 |
Income before income taxes |  | $ | 298,664 |  |  | $ | 248,619 |  |  | $ | 223,612 |
The components of income tax expense (benefit) are as follows (in thousands):
|  | Year ended June 30, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 56,467 |  |  | $ | 54,425 |  |  | $ | 54,507 |
State and local |  |  | 13,006 |  |  |  | 11,334 |  |  |  | 9,401 |
Foreign |  |  | 5,344 |  |  |  | 4,041 |  |  |  | 3,337 |
Total current |  |  | 74,817 |  |  |  | 69,800 |  |  |  | 67,245 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (80,395 | ) |  |  | 13,076 |  |  |  | 11,978 |
State and local |  |  | 3,481 |  |  |  | 2,917 |  |  |  | 2,028 |
Foreign |  |  | (410 | ) |  |  | (845 | ) |  |  | (438 | )
Total deferred |  |  | (77,324 | ) |  |  | 15,148 |  |  |  | 13,568 |
Total income tax (benefit) expense |  | $ | (2,507 | ) |  | $ | 84,948 |  |  | $ | 80,813 |
Income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate as a result of the following (in thousands):
|  | Year ended June 30, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Expected tax expense computed at federal statutory rate (1) |  | $ | 83,805 |  |  | $ | 87,017 |  |  | $ | 78,264 |
State and local taxes, net of federal benefit |  |  | 11,860 |  |  |  | 9,263 |  |  |  | 7,429 |
Nonincludible and nondeductible items, net |  |  | 1,832 |  |  |  | 1,087 |  |  |  | 2,936 |
Remeasurement of deferred taxes and transition tax |  |  | (86,593 | ) |  |  | — |  |  |  | — |
Effect of foreign tax rates |  |  | (1,261 | ) |  |  | (2,320 | ) |  |  | (2,308 | )
R&D tax credit |  |  | (3,630 | ) |  |  | (4,894 | ) |  |  | (135 | )
Other tax credits |  |  | (2,102 | ) |  |  | (1,321 | ) |  |  | (1,744 | )
ASU 2016-09 share-based compensation |  |  | (5,388 | ) |  |  | (1,390 | ) |  |  | (1,061 | )
Other |  |  | (1,030 | ) |  |  | (2,494 | ) |  |  | (2,568 | )
Total income tax (benefit) expense |  | $ | (2,507 | ) |  | $ | 84,948 |  |  | $ | 80,813 |
| (1) | The U.S. federal statutory income tax rate for FY2018 is a blended rate of 28.06 percent due to the TCJA. The federal statutory rate for FY2017 and FY2016 was 35.0 percent.
The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):
|  | June 30, |
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Deferred compensation and post-retirement obligations |  | $ | 27,842 |  |  | $ | 37,257 |
Reserves and accruals |  |  | 30,180 |  |  |  | 40,058 |
Stock-based compensation |  |  | 7,793 |  |  |  | 13,599 |
Deferred rent |  |  | 3,750 |  |  |  | 6,091 |
Other |  |  | — |  |  |  | 2,000 |
Total deferred tax assets |  |  | 69,565 |  |  |  | 99,005 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Goodwill and other intangible assets |  |  | (238,020 | ) |  |  | (337,849 | )
Unbilled revenue |  |  | (17,363 | ) |  |  | (20,913 | )
Prepaid expenses |  |  | (3,991 | ) |  |  | (4,554 | )
Interest rate swap |  |  | (3,701 | ) |  |  | (963 | )
Other |  |  | (7,370 | ) |  |  | (8,046 | )
Total deferred tax liabilities |  |  | (270,445 | ) |  |  | (372,325 | )
Net deferred tax liability |  | $ | (200,880 | ) |  | $ | (273,320 | )
The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company's consolidated federal income tax returns through June 30, 2014 are no longer subject to audit. The Company is currently under examination by one state jurisdiction for years 2011 through 2017 and one foreign jurisdiction for years 2011 through 2015. The Company does not expect the resolution of these examinations to have a material impact on its results of operations, financial condition or cash flows. The effective income tax rate for FY2018 is lower than FY2017 primarily due to estimated benefits related to the TCJA. The effective tax rate was also favorably affected by excess tax benefits from employee share-based payment awards under ASU 2016-09, a benefit from the research and development tax credit, and gains from the change in value of assets invested in corporate-owned life insurance (COLI) policies. U.S. income taxes have not been provided for undistributed earnings of foreign subsidiaries that have been permanently reinvested outside the United States. As of June 30, 2018, the estimated deferred tax liability associated with these undistributed earnings is approximately $0.6 million. The Company’s total liability for unrecognized tax benefits as of June 30, 2018, 2017 and 2016 was approximately $4.1 million, $1.6 million and $0.4 million, respectively. Of the unrecognized tax benefits at June 30, 2018, 2017 and 2016, $4.1 million, $1.6 million and $0.4 million, respectively, if recognized, would impact the Company’s effective tax rate. A reconciliation of the beginning and ending amount of unrecognized benefits is shown in the table below (in thousands):
|  | Year ended June 30, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Beginning of year |  | $ | 1,639 |  |  | $ | 398 |  |  | $ | 6,220 |
Additions based on current year tax positions |  |  | 2,483 |  |  |  | 1,475 |  |  |  | 89 |
Lapse of statute of limitations |  |  | — |  |  |  | (234 | ) |  |  | (128 | )
Settlement with taxing authorities |  |  | — |  |  |  | — |  |  |  | (5,783 | )
End of year |  | $ | 4,122 |  |  | $ | 1,639 |  |  | $ | 398 |
The Company recognizes net interest and penalties as a component of income tax expense. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2018. As of June 30, 2018, the entire balance of unrecognized tax benefits is included in other long-term liabilities.

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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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