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INCOME TAXES | 9 Months Ended
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Mar. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Our effective tax rate represents the net effect of the mix of income earned in various tax jurisdictions that are subject to a wide range of income tax rates. The effective tax rate increased to a provision of 35.5% for the three months ended March 31, 2022, compared to a provision of 25.8% for the three months ended March 31, 2021. Tax expense increased from $31.8 million during the three months ended March 31, 2021 to $41.0 million during the three months ended March 31, 2022. This was primarily due to (i) an increase of $10.6 million related to the US Base Erosion and Anti-Abuse Tax (US BEAT) and (ii) an increase of $4.4 million relating to tax impacts of legal entity rationalization. These were partially offset by (i) a net decrease of $2.9 million related to Foreign Accrual Property Income and (ii) a net increase of $2.1 million benefit related to the 50% exclusion on gains in certain investment funds in which we are a limited partner. The remainder of the difference was due to normal course movements and non-material items. The effective tax rate decreased to a provision of 29.6% for the nine months ended March 31, 2022, compared to a provision of 72.5% for the nine months ended March 31, 2021. Tax expense decreased from $342.1 million during the nine months ended March 31, 2021 to $123.8 million during the nine months ended March 31, 2022. This was primarily due to (i) a decrease of $300.6 million related to Internal Revenue Service (IRS) settlements in Fiscal 2021, (ii) a decrease of $11.3 million related to differences in tax filings, (iii) a net decrease of $5.9 million for related Subpart F and (iv) an increase of $5.2 million benefit related to the 50% exclusion on gains in certain investment funds in which we are a limited partner. These were partially offset by (i) an increase of $90.6 million for changes in unrecognized tax benefits, (ii) a net increase of $17.0 million related to internal reorganizations and (iii) a decrease of $4.4 million in share-based compensation benefits. The remainder of the difference was due to normal course movements and non-material items. We recognize interest expense and penalties related to income tax matters in income tax expense. For the three and nine months ended March 31, 2022 and 2021, respectively, we recognized the following amounts as income tax-related interest expense and penalties:
| Three Months Ended March 31, |  | Nine Months Ended March 31,
| 2022 |  | 2021 |  | 2022 |  | 2021
Interest expense | $ | 336 |  |  | $ | 1,315 |  |  | $ | 803 |  |  | $ | 45,422 |
Penalties expense | 245 |  |  | 506 |  |  | 418 |  |  | 889 |
Total | $ | 581 |  |  | $ | 1,821 |  |  | $ | 1,221 |  |  | $ | 46,311 |
The following amounts have been accrued on account of income tax-related interest expense and penalties:
| As of March 31, 2022 |  | As of June 30, 2021
Interest expense accrued (1) | $ | 5,751 |  |  | $ | 5,166 |
Penalties accrued (1) | $ | 2,553 |  |  | $ | 2,605 |
(1) These balances are primarily included within “Long-term income taxes payable” within the Condensed Consolidated Balance Sheets. We believe that it is reasonably possible that the gross unrecognized tax benefits, as of March 31, 2022, could decrease tax expense in the next 12 months by $3.1 million, relating primarily to the expiration of competent authority relief and tax years becoming statute barred for purposes of future tax examinations by local taxing jurisdictions. Our four most significant tax jurisdictions are Canada, the United States, Luxembourg and Germany. Our tax filings remain subject to audits by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The earliest fiscal years open for examination are 2012 for Canada, 2016 for the United States and 2012 for Germany. As of December 31, 2021, the Fiscal 2015 and Fiscal 2016 tax years for Luxembourg became statute barred. We are subject to income tax audits in all major taxing jurisdictions in which we operate and currently have income tax audits open in Canada, the United States, Germany, India and France. On a quarterly basis we assess the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income and other taxes. Statements regarding the Canada audits are included in note 14 “Guarantees and Contingencies”. The timing of the resolution of income tax audits is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax audits in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes. For more information relating to certain income tax audits, please refer to note 14 “Guarantees and Contingencies”. As of March 31, 2022, we have recognized a provision of $29.2 million (June 30, 2021—$27.5 million) in respect of both additional foreign taxes or deferred income tax liabilities for temporary differences related to the undistributed earnings of certain non-United States subsidiaries and planned periodic repatriations from certain German subsidiaries, that will be subject to withholding taxes upon distribution. We have not provided for additional foreign withholding taxes or deferred income tax liabilities related to undistributed earnings of all other non-Canadian subsidiaries, since such earnings are considered permanently invested in those subsidiaries or are not subject to withholding taxes. It is not practicable to reasonably estimate the amount of additional deferred income tax liabilities or foreign withholding taxes that may be payable should these earnings be distributed in the future.

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