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Income Taxes | 12 Months Ended
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Jun. 30, 2020
Income Taxes |
Income Taxes | 5. Income Taxes The provision for income taxes is based on earnings reported in the consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the year. ​ Deferred tax assets and liabilities result primarily from temporary differences in book versus tax basis accounting. Deferred tax assets and liabilities consist of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ |  | 2020 |  | 2019
​ | ​ | (In thousands)
Deferred tax assets | ​ | ​ | ​ | ​ | ​ | ​
Net operating loss carryforward | ​ | $ | 21,850 | ​ | $ | 4,923
Reserves | ​ |  | 3,374 | ​ |  | 4,769
Accrued expenses | ​ |  | 4,117 | ​ |  | 3,492
Stock compensation expense | ​ |  | 7,064 | ​ |  | 5,992
Other assets | ​ |  | 2,252 | ​ |  | 1,524
Deferred rent | ​ |  | — | ​ |  | 1,056
Deferred revenue | ​ |  | 759 | ​ |  | 461
Lease liability | ​ | ​ | 29,640 | ​ | ​ | —
Federal tax credits | ​ |  | 20 | ​ |  | 20
State tax credits | ​ |  | 44 | ​ |  | 363
Total deferred tax assets | ​ |  | 69,120 | ​ |  | 22,600
Deferred tax liabilities | ​ | ​ | ​ | ​ | ​ | ​
Capitalized curriculum development | ​ |  | (9,245) | ​ |  | (10,143)
Capitalized software and website development costs | ​ |  | (11,907) | ​ |  | (12,659)
Property and equipment | ​ |  | (6,213) | ​ |  | (5,166)
Right-of-use assets | ​ | ​ | (28,273) | ​ | ​ | —
Returned materials | ​ |  | (2,385) | ​ |  | (2,643)
Purchased intangibles | ​ |  | (19,877) | ​ |  | (4,110)
Total deferred tax liabilities | ​ |  | (77,900) | ​ |  | (34,721)
Net deferred tax liability before valuation allowance | ​ |  | (8,780) | ​ |  | (12,121)
Valuation allowance | ​ |  | (4,991) | ​ |  | (4,549)
Net deferred tax liability | ​ | $ | (13,771) | ​ | $ | (16,670)
Reported as: | ​ | ​ | ​ | ​ | ​ | ​
Long-term deferred tax liabilities | ​ | $ | (13,771) | ​ | $ | (16,670)
​ The Company maintained a valuation allowance on net noncurrent deferred tax assets of $5.0 million and $4.5 million as of June 30, 2020 and 2019, respectively, predominantly related to foreign income tax net operating losses ("NOL"). At June 30, 2020, the Company had approximately $65.1 million of available federal NOL carryforwards solely related to the acquisition of Galvanize in January 2020. The federal NOL carryforwards, in the amount of $18.1 million, generated prior to 2018 will begin to expire, if unused, in 2033. Due to the Tax Cuts and Jobs Act (the “Tax Act”), the federal NOL carryforwards, in the amount of $47.0 million, generated after 2017 have an indefinite carryforward period. Section 382 of the Internal Revenue Code limits the utilization of NOL carryforwards following a change of control. The Company has performed an analysis of the Section 382 ownership changes and have determined that it will be able to fully utilize its available NOLs subject to the Section 382 limitation. At June 30, 2020, the Company had tax effected state NOL carryforwards of $3.2 million, net of valuation allowances, and will expire on various dates. The components of the income tax expense (benefit) for the years ended June 30, 2020, 2019 and 2018 were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended June 30,
​ |  | 2020 |  | 2019 |  | 2018
​ | ​ | (In thousands)
Current: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ | $ | 6,907 | ​ | $ | 3,919 | ​ | $ | 887
State | ​ |  | 1,911 | ​ |  | 1,988 | ​ |  | 774
Foreign | ​ |  | 1,028 | ​ |  | 920 | ​ |  | 1,444
Total current | ​ |  | 9,846 | ​ |  | 6,827 | ​ |  | 3,105
Deferred: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ |  | (1,687) | ​ |  | 3,412 | ​ |  | (4,769)
State | ​ |  | 382 | ​ |  | 281 | ​ |  | 754
Total deferred | ​ |  | (1,305) | ​ |  | 3,693 | ​ |  | (4,015)
Total income tax expense (benefit) | ​ | $ | 8,541 | ​ | $ | 10,520 | ​ | $ | (910)
​ The provision for (benefit from) income taxes can be reconciled to the income tax that would result from applying the statutory rate to the net income before income taxes as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended June 30, |
​ |  | 2020 |  | 2019 |  | 2018 |
U.S. federal tax at statutory rates (1) | ​ | 21.0 | % | 21.0 | % | 28.0 | %
Permanent items |  | 1.1 | ​ | 0.5 | ​ | 0.6 | ​
Lobbying |  | 0.4 | ​ | 0.4 | ​ | 1.2 | ​
Non-deductible compensation | ​ | 9.0 | ​ | 1.6 | ​ | 0.3 | ​
State taxes, net of federal benefit |  | 5.3 | ​ | 4.3 | ​ | 3.1 | ​
Research and development tax credits |  | (1.8) | ​ | (0.5) | ​ | - | ​
Domestic production activities deduction |  | - | ​ | - | ​ | (0.1) | ​
Change in valuation allowance |  | 0.1 | ​ | 0.2 | ​ | (7.2) | ​
Effects of foreign operations |  | 0.3 | ​ | 0.1 | ​ | - | ​
Reserve for unrecognized tax benefits |  | (2.4) | ​ | (2.1) | ​ | 0.9 | ​
Noncontrolling interests |  | - | ​ | - | ​ | 0.4 | ​
Other |  | (0.8) | ​ | (0.4) | ​ | (3.9) | ​
Impact of federal tax rate reduction | ​ | - | ​ | - | ​ | (25.4) | ​
Repatriation transition tax | ​ | - | ​ | - | ​ | 6.4 | ​
Stock-based compensation | ​ | (6.4) | ​ | (3.1) | ​ | (7.7) | ​
Provision for (benefit from) income taxes |  | 25.8 | % | 22.0 | % | (3.4) | %
​
| (1) | The corporate tax rate was lowered from 35% to 21%, effective as of January 1, 2018. Under IRC §15 which governs rate changes, fiscal year taxpayers are subject to a “blended” tax rate for tax years that include January 1, 2018. Using the weighted average calculation, the Company’s blended federal tax rate for the year ended June 30, 2018 is 28%.
The increase in the effective income tax rate for the year ended June 30, 2020 was primarily due to the increase in the amount of non-deductible compensation, which was partially offset by the increase in excess tax benefit of stock-based compensation. Tax Uncertainties The Company follows the provisions of ASC 740 which applies to all tax positions related to income taxes. ASC 740 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. ASC 740 clarifies accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. If the probability for sustaining a tax position is greater than 50%, then the tax position is warranted and recognition should be at the highest amount which would be expected to be realized upon ultimate settlement related to unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of June 30, 2020, 2019 and 2018, the Company had $0.1 million, $0.2 million and $0.2 million in accrued interest and penalties, respectively. The unrecognized tax benefits for the years ended June 30, 2020, 2019 and 2018 were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended June 30,
​ |  | 2020 |  | 2019 |  | 2018
​ | ​ | (In thousands)
Balance at beginning of the year | ​ | $ | 1,545 | ​ | $ | 2,392 | ​ | $ | 2,260
Additions for prior year tax positions | ​ |  | 161 | ​ |  | 194 | ​ |  | 585
Additions for current year tax positions | ​ |  | 179 | ​ |  | 87 | ​ |  | 8
Reductions for prior year tax positions | ​ | ​ | (1,035) | ​ | ​ | (1,128) | ​ | ​ | (461)
Balance at end of the year | ​ | $ | 850 | ​ | $ | 1,545 | ​ | $ | 2,392
​ If recognized, all of the $0.9 million balance of unrecognized tax benefits as of June 30, 2020 would affect the effective tax rate. The Company does not anticipate a significant increase or decrease in unrecognized tax benefits in the next twelve months. The Company remains subject to audit by the Internal Revenue Service for federal tax purposes for tax years after June 30, 2016. Certain state and foreign tax jurisdictions are also either currently under audit or remain open under the statute of limitations for the tax years after June 30, 2014.

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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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