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INCOME TAXES | 12 Months Ended
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Jun. 30, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 20. INCOME TAXES The Company changed its method of accounting related to the capitalization of property and equipment for its FY2020 U.S. federal income tax return (filed in the fourth quarter of FY2021), increasing its taxable income. Subsequently, the Company made a related change in its method of accounting that will result in a net operating loss (NOL) on its FY2021 income tax returns. Pursuant to provisions under the CARES Act, the U.S. federal income tax NOL generated in FY2021 will be carried back to tax years when the U.S. federal statutory income tax rate was greater than the current 21.0 percent. As a result of these method changes, in the fourth quarter of FY2021 the Company recorded a $56.2 million dollar income tax benefit and an income tax receivable of $232.6 million, which is included within prepaid expenses and other current assets on the accompanying consolidated balance sheet. The domestic and foreign components of income before provision for income taxes are as follows (in thousands):
|  | Year Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Domestic |  | $ | 471,711 |  |  | $ | 379,414 |  |  | $ | 308,922 |
Foreign |  |  | 27,904 |  |  |  | 22,223 |  |  |  | 18,987 |
Income before income taxes |  | $ | 499,615 |  |  | $ | 401,637 |  |  | $ | 327,909 |
The components of income tax expense are as follows (in thousands):
|  | Year Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (94,143 | ) |  | $ | 42,268 |  |  | $ | 41,675 |
State and local |  |  | 19,958 |  |  |  | 14,744 |  |  |  | 17,606 |
Foreign |  |  | 7,384 |  |  |  | 5,271 |  |  |  | 4,033 |
Total current |  |  | (66,801 | ) |  |  | 62,283 |  |  |  | 63,314 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 109,157 |  |  |  | 12,940 |  |  |  | (27 | )
State and local |  |  | 185 |  |  |  | 5,465 |  |  |  | (877 | )
Foreign |  |  | (369 | ) |  |  | (531 | ) |  |  | (105 | )
Total deferred |  |  | 108,973 |  |  |  | 17,874 |  |  |  | (1,009 | )
Total income tax expense |  | $ | 42,172 |  |  | $ | 80,157 |  |  | $ | 62,305 |
Income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0 percent as a result of the following (in thousands):
|  | Year Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Expected tax expense computed at federal statutory rate |  | $ | 104,919 |  |  | $ | 84,344 |  |  | $ | 68,861 |
State and local taxes, net of federal benefit |  |  | 21,252 |  |  |  | 15,965 |  |  |  | 13,216 |
Remeasurement of current year NOL |  |  | (56,192 | ) |  |  | — |  |  |  | — |
Nonincludible and nondeductible items, net |  |  | (2,269 | ) |  |  | 3,133 |  |  |  | 1,971 |
Remeasurement of deferred taxes and transition tax |  |  | — |  |  |  | — |  |  |  | (2,182 | )
Effect of foreign tax rates |  |  | (687 | ) |  |  | (377 | ) |  |  | (380 | )
R&D tax credit, net |  |  | (18,173 | ) |  |  | (10,700 | ) |  |  | (6,755 | )
Other tax credits |  |  | (648 | ) |  |  | (1,183 | ) |  |  | (2,138 | )
Stock-based compensation |  |  | (5,525 | ) |  |  | (10,900 | ) |  |  | (7,493 | )
Other |  |  | (505 | ) |  |  | (125 | ) |  |  | (2,795 | )
Total income tax expense |  | $ | 42,172 |  |  | $ | 80,157 |  |  | $ | 62,305 |
Effective income tax rate |  |  | 8.4 | % |  |  | 20.0 | % |  |  | 19.0 | %
The effective income tax rate in FY2021, FY2020, and FY2019, was 8.4 percent, 20.0 percent, and 19.0 percent, respectively. The effective income tax rate decreased in FY2021 primarily as a result of the $56.2 million benefit related to the carryback of the federal income tax NOL under the CARES Act, as well as an increase in research and development tax credits for past and current year returns. The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Deferred compensation and post-retirement obligations |  | $ | 36,183 |  |  | $ | 33,094 |
Reserves and accruals |  |  | 58,900 |  |  |  | 41,137 |
Stock-based compensation |  |  | 11,767 |  |  |  | 9,860 |
NOL carryforward |  |  | 39,123 |  |  |  | — |
Lease liability |  |  | 110,282 |  |  |  | 99,539 |
Interest rate swaps |  |  | 6,800 |  |  |  | 11,349 |
Other assets |  |  | 2,757 |  |  |  | 6,786 |
Total deferred tax assets |  |  | 265,812 |  |  |  | 201,765 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Goodwill and other intangible assets |  |  | (291,282 | ) |  |  | (273,088 | )
Unbilled revenue |  |  | (35,115 | ) |  |  | (17,429 | )
Prepaid expenses |  |  | (8,932 | ) |  |  | (6,444 | )
Right of use assets |  |  | (90,186 | ) |  |  | (85,275 | )
Property and equipment |  |  | (167,527 | ) |  |  | (32,625 | )
Total deferred tax liabilities |  |  | (593,042 | ) |  |  | (414,861 | )
Net deferred tax liability |  | $ | (327,230 | ) |  | $ | (213,096 | )
As discussed above, the FY2021 change in method of accounting will result in net operating losses on the Company’s FY2021 tax returns. For state tax purposes, the related losses will be carried forward, thus a NOL carryforward was recorded. The increase in the property and equipment deferred tax liability largely relates to the Company's changes in method of accounting and represents income to be recognized in future years 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 is currently under examination by the Internal Revenue Service for fiscal years 2017 through 2019. 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. 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, 2021, the estimated deferred tax liability associated with these undistributed earnings is approximately $1.9 million. Changes in the Company’s liability for unrecognized tax benefits is shown in the table below (in thousands):
|  | Year Ended June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Beginning of year |  | $ | 8,826 |  |  | $ | 1,530 |  |  | $ | 4,122 |
Additions based on current year tax positions |  |  | 5,702 |  |  |  | 2,293 |  |  |  | 676 |
Lapse of statute of limitations |  |  | — |  |  |  | — |  |  |  | (164 | )
Additions based on prior year tax positions |  |  | 20,025 |  |  |  | 5,003 |  |  |  | — |
Reductions based on prior tax year positions |  |  | — |  |  |  | — |  |  |  | (3,104 | )
Settlement with taxing authorities |  |  | (3,048 | ) |  |  | — |  |  |  | — |
End of year |  | $ | 31,505 |  |  | $ | 8,826 |  |  | $ | 1,530 |
The Company’s total liability for unrecognized tax benefits as of June 30, 2021, 2020 and 2019 was approximately $ 31.5 million, $8.8 million and $1.5 million, respectively. During FY2021, the Company recognized an increase in reserves primarily related to current and prior year research and development tax credits. Any amount, if recognized, would positively impact the Company’s effective tax rate. 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, 2021. As of June 30, 2021, 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://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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