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Income Taxes | 12 Months Ended
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Jun. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The domestic and foreign components of income before provision for income taxes are as follows (in thousands):
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
Domestic | $ | 480,145 |  |  | $ | 447,975 |  |  | $ | 421,942 |
Foreign | 64,504 |  |  | 35,664 |  |  | 32,630 |
Income before income taxes | $ | 544,649 |  |  | $ | 483,639 |  |  | $ | 454,572 |
The components of income tax expense are as follows (in thousands):
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 130,621 |  |  | $ | 184,040 |  |  | $ | 66,956 |
State and local | 26,268 |  |  | 49,824 |  |  | 1,372 |
Foreign | 17,599 |  |  | 11,053 |  |  | 9,880 |
Total current | 174,488 |  |  | 244,917 |  |  | 78,208 |
Deferred: |  |  |  |  |
Federal | (42,322) |  |  | (109,894) |  |  | (12,884) |
State and local | (6,827) |  |  | (36,717) |  |  | 22,140 |
Foreign | (614) |  |  | 598 |  |  | 314 |
Total deferred | (49,763) |  |  | (146,013) |  |  | 9,570 |
Total income tax expense | $ | 124,725 |  |  | $ | 98,904 |  |  | $ | 87,778 |
Income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0% as a result of the following (in thousands):
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
Expected tax expense computed at federal statutory rate | $ | 114,376 |  |  | $ | 101,564 |  |  | $ | 95,460 |
State and local taxes, net of federal benefit | 16,508 |  |  | 15,900 |  |  | 21,295 |
Remeasurement of current year NOL | — |  |  | — |  |  | (1,124) |
R&D tax credit, net | (12,604) |  |  | (14,205) |  |  | (15,708) |
Stock-based compensation | (2,385) |  |  | (930) |  |  | (3,981) |
Nonincludible and nondeductible items, net | 4,368 |  |  | 1,105 |  |  | 1,588 |
Remeasurement of deferred taxes | (1,150) |  |  | (5,546) |  |  | (5,629) |
Other | 5,612 |  |  | 1,016 |  |  | (4,123) |
Total income tax expense | $ | 124,725 |  |  | $ | 98,904 |  |  | $ | 87,778 |
Effective income tax rate | 22.9 | % |  | 20.4 | % |  | 19.3 | %
The effective tax rate for fiscal 2024 was favorably impacted by research and development tax credits, offset by state income taxes. The effective tax rate for fiscal 2023 was favorably impacted pr imarily by federal research tax credits and the remeasurement of state deferred taxes. The effective tax rate for fiscal 2022 was favorably impacted primarily by the Company’s method of accounting changes that resulted in a carryback of a federal income NOL and related income tax benefit as well as federal research tax credits. The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):
| June 30,
| 2024 |  | 2023
Deferred tax assets: |  |  |
Operating lease liabilities | $ | 97,911 |  |  | $ | 102,679 |
Reserves and accruals | 22,172 |  |  | 27,881 |
Capitalized research and development | 170,086 |  |  | 191,872 |
Credits and net operating loss carryovers | 9,407 |  |  | 4,284 |
Deferred compensation and post-retirement obligations | 34,315 |  |  | 34,477 |
Stock-based compensation | 12,362 |  |  | 11,032 |
Valuation allowance | (2,887) |  |  | — |
Total deferred tax assets | 343,366 |  |  | 372,225 |
Deferred tax liabilities: |  |  |
Goodwill and other intangible assets | (357,150) |  |  | (331,845) |
Property, plant and equipment | (27,578) |  |  | (31,068) |
Operating lease right-of-use assets | (74,769) |  |  | (78,670) |
Deferred revenue | (23,591) |  |  | (26,543) |
Prepaid expenses | (12,084) |  |  | (11,177) |
Interest rate swaps | (8,322) |  |  | (10,943) |
Other | (9,680) |  |  | (2,524) |
Total deferred tax liabilities | (513,174) |  |  | (492,770) |
Net deferred tax liability | $ | (169,808) |  |  | $ | (120,545) |
During fiscal 2023, a provision of the TCJA went into effect that eliminated the option to deduct domestic research and development costs in the year incurred and instead requires taxpayers to capitalize and amortize such costs over five years. This provision decreased fiscal 2024 and 2023 cash flows from operations by $73.9 million and $95.0 million, respectively, and increased net deferred tax assets by a similar amount. The future impact of this provision will depend on any guidance issued by the Treasury Department regarding the identification of appropriate costs for capitalization, and the amount of future research and development expenses paid or incurred (among other factors). The deferred tax assets and liabilities were remeasured in fiscal 2024 due to a reduction in the blended state effective tax rate. 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 (IRS) for fiscal 2017 through 2021 and one state jurisdiction for fiscal 2019 and 2020. Based on the current IRS audit status and expected conclusion timing, approximately $76.7 million of federal income tax receivables have been classified as long term as of June 30, 2024. 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, 2024, the estimated deferred tax liability associated with these undistributed earnings is approximately $2.9 million. Changes in the Company’s liability for unrecognized tax benefits is shown in the table below (in thousands):
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
Beginning of year | $ | 153,860 |  |  | $ | 42,810 |  |  | $ | 31,505 |
Additions based on prior year tax positions | 3,592 |  |  | 3,829 |  |  | 8,221 |
Additions based on current year tax positions | 11,703 |  |  | 107,221 |  |  | 8,313 |
Reductions based on prior year tax positions | (96,111) |  |  | — |  |  | — |
Settlement with taxing authorities | — |  |  | — |  |  | (5,229) |
End of year | $ | 73,044 |  |  | $ | 153,860 |  |  | $ | 42,810 |
Unrecognized tax benefits that, if recognized, would affect the effective tax rate | $ | 73,044 |  |  | $ | 56,944 |  |  | $ | 42,810 |
The Company’s total liability for unrecognized tax benefits as of June 30, 2024, 2023 and 2022 was approximately $73.0 million, $153.9 million and $42.8 million, respectively. During fiscal 2023, the Company recognized an increase in reserves related to the required capitalization of research and development expenses, which became effective in fiscal 2023, and current and prior year research and development tax credits. During fiscal 2024, the Company reduced its unrecognized tax benefit, primarily due to completing a detailed analysis of capitalized research and development costs which considered recent guidance issued by the IRS. 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, 2024. As of June 30, 2024, the entire balance of unrecognized tax benefits is included in deferred taxes and other long-term liabilities.

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