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Income Taxes | 12 Months Ended
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Jun. 30, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | 16. Income Taxes Income (loss) before income taxes is as follows (in thousands):
|  | Year Ended |
|  | June 30, |  |  | June 30, |  |  | June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Domestic |  | $ | (4,194 | ) |  | $ | (143,651 | ) |  | $ | 22,330 |
Foreign |  |  | 14,379 |  |  |  | 23,159 |  |  |  | (48,204 | )
Income (loss) before income taxes |  | $ | 10,185 |  |  | $ | (120,492 | ) |  | $ | (25,874 | )
The provision (benefit) for income taxes for the years ended 2021, 2020 and 2019 consisted of the following (in thousands):
|  | Year Ended |
|  | June 30, |  |  | June 30, |  |  | June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | (22 | ) |  | $ | — |
State |  |  | 1,160 |  |  |  | 256 |  |  |  | 655 |
Foreign |  |  | 5,334 |  |  |  | 4,597 |  |  |  | 5,100 |
Total current |  |  | 6,494 |  |  |  | 4,831 |  |  |  | 5,755 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 324 |  |  |  | 333 |  |  |  | (3,691 | )
State |  |  | 1,169 |  |  |  | 44 |  |  |  | (488 | )
Foreign |  |  | 262 |  |  |  | 1,145 |  |  |  | (1,597 | )
Total deferred |  |  | 1,755 |  |  |  | 1,522 |  |  |  | (5,776 | )
Provision (benefit) for income taxes |  | $ | 8,249 |  |  | $ | 6,353 |  |  | $ | (21 | )
The difference between the provision (benefit) for income taxes and the amount computed by applying the federal statutory income tax rate (21 percent) to income (loss) before income taxes is explained below (in thousands):
|  | Year Ended |
|  | June 30, |  |  | June 30, |  |  | June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Tax at federal statutory rate |  | $ | 2,139 |  |  | $ | (25,303 | ) |  | $ | (5,433 | )
State income tax, net of federal benefit |  |  | 917 |  |  |  | 202 |  |  |  | 517 |
Release of foreign valuation allowance |  |  | — |  |  |  | — |  |  |  | (2,794 | )
Release of US valuation allowance – Tax reform |  |  | — |  |  |  | — |  |  |  | (4,680 | )
Establishment of Irish valuation allowance |  |  | — |  |  |  | — |  |  |  | 8,642 |
US valuation allowance change – deferred tax movement |  |  | (9,387 | ) |  |  | 2,414 |  |  |  | (4,444 | )
Research and development credits |  |  | (2,423 | ) |  |  | (4,947 | ) |  |  | (6,598 | )
Tax impact of foreign earnings |  |  | 11,979 |  |  |  | 6,925 |  |  |  | 9,817 |
Foreign withholding taxes |  |  | 828 |  |  |  | 762 |  |  |  | 745 |
Stock based compensation |  |  | 1,162 |  |  |  | 4,349 |  |  |  | 2,436 |
Goodwill amortization |  |  | 1,467 |  |  |  | 331 |  |  |  | 834 |
Nondeductible officer compensation |  |  | 1,496 |  |  |  | 862 |  |  |  | 713 |
Nondeductible meals and entertainment |  |  | 71 |  |  |  | 364 |  |  |  | 517 |
AMT credit monetization |  |  | — |  |  |  | (22 | ) |  |  | — |
Gain on transfer of intellectual property ("IP") |  |  | — |  |  |  | 19,819 |  |  |  | — |
Other |  |  | — |  |  |  | 597 |  |  |  | (293 | )
Provision (benefit) for income taxes |  | $ | 8,249 |  |  | $ | 6,353 |  |  | $ | (21 | )
Significant components of the Company’s deferred tax assets are as follows (in thousands):
|  | June 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |  |  |  |  |
Net operating loss carry-forwards |  | $ | 69,126 |  |  | $ | 74,548 |  |  | $ | 36,514 |
Tax credit carry-forwards |  |  | 68,003 |  |  |  | 67,364 |  |  |  | 54,745 |
Depreciation |  |  | 3,113 |  |  |  | 2,755 |  |  |  | 2,168 |
Intangible amortization |  |  | 35,340 |  |  |  | 32,642 |  |  |  | 36,882 |
Deferred revenue |  |  | 11,625 |  |  |  | 7,610 |  |  |  | 1,887 |
Inventory write-downs |  |  | 14,501 |  |  |  | 13,014 |  |  |  | 10,277 |
Other allowances and accruals |  |  | 28,899 |  |  |  | 32,318 |  |  |  | 30,210 |
Stock based compensation |  |  | 2,792 |  |  |  | 3,169 |  |  |  | 4,114 |
Deferred intercompany gain |  |  | 3,693 |  |  |  | 3,693 |  |  |  | 3,693 |
Ireland goodwill amortization |  |  | 6,303 |  |  |  | 7,132 |  |  |  | — |
Other |  |  | 1,175 |  |  |  | 888 |  |  |  | 673 |
Total deferred tax assets |  |  | 244,570 |  |  |  | 245,133 |  |  |  | 181,163 |
Valuation allowance |  |  | (230,588 | ) |  |  | (232,862 | ) |  |  | (169,343 | )
Total net deferred tax assets |  |  | 13,982 |  |  |  | 12,271 |  |  |  | 11,820 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Goodwill amortization |  |  | (8,575 | ) |  |  | (6,691 | ) |  |  | (4,904 | )
Prepaid commissions |  |  | (3,166 | ) |  |  | (1,958 | ) |  |  | (1,585 | )
Deferred tax liability on foreign withholdings |  |  | (578 | ) |  |  | (551 | ) |  |  | (505 | )
Total deferred tax liabilities |  |  | (12,319 | ) |  |  | (9,200 | ) |  |  | (6,994 | )
Net deferred tax assets |  | $ | 1,663 |  |  | $ | 3,071 |  |  | $ | 4,826 |
Recorded as: |  |  |  |  |  |  |  |  |  |  |  |
Net non-current deferred tax assets |  |  | 5,491 |  |  |  | 5,405 |  |  |  | 6,783 |
Net non-current deferred tax liabilities |  |  | (3,828 | ) |  |  | (2,334 | ) |  |  | (1,957 | )
Net deferred tax assets |  | $ | 1,663 |  |  | $ | 3,071 |  |  | $ | 4,826 |
The Company’s global valuation allowance decreased by $2.2 million in the fiscal year ended June 30, 2021 and increased by $63.5 million in the fiscal year ended June 30, 2020. The Company has provided a full valuation allowance against all of its U.S. federal and state deferred tax assets, as well as valuation allowances against certain non-U.S. deferred tax assets in Ireland and Brazil. The valuation allowance is determined by assessing both negative and positive available evidence to determine whether it is more likely than not that the deferred tax assets will be recoverable. The Company's inconsistent earnings in recent periods, including a cumulative loss over the last three years and the cyclical nature of the Company's business provides sufficient negative evidence that require a full valuation allowance against its U.S. federal and state net deferred tax assets. The valuation allowance is evaluated periodically and can be reversed partially or in full if business results and the economic environment have sufficiently improved to support realization of the Company's deferred tax assets. As of June 30, 2021, the Company had net operating loss carry-forwards (“NOLs”) for U.S. federal and state tax purposes of $242.0 million and $156.2 million, respectively. As of June 30, 2021, the Company also had foreign net operating loss carry-forwards in Ireland, Australia and Brazil of $17.2 million, $7.7 million and $14.7 million, respectively. As of June 30, 2021, the Company also had federal and state tax credit carry-forwards of $42.8 million and $31.9 million, respectively. These credit carry-forwards consist of research and development tax credits as well as foreign tax credits. Of the $242.0 million U.S. federal net operating loss carry-forwards, $144.9 million will begin to expire in the fiscal year ending June 30, 2033 and $97.1 million have an indefinite carryforward life. The state net operating losses of $156.2 million will begin to partially expire in the fiscal year ending June 30, 2022. The foreign net operating losses can generally be carried forward indefinitely. Federal research and development tax credits of $33.7 million will expire beginning in fiscal 2022, if not utilized and foreign tax credits of $9.1 million will expire beginning in fiscal 2022. North Carolina state research and development tax credits of $0.9 million will expire beginning in the fiscal year ending June 30, 2024, if not utilized. California state research and development tax credits of $31.0 million do not expire and can be carried forward indefinitely. In October 2020, the Company performed an analysis under Section 382 of the Internal Revenue Code (“IRC”) with respect to its net operating loss and credit carry-forwards to determine whether a potential ownership change had occurred that would place a limitation on the annual utilization of these U.S. tax attributes. It was determined that no ownership change had occurred during the fiscal year ended June 30, 2020, however, it is possible a subsequent ownership change could limit the utilization of the Company's tax attributes. The Company also performed in June 2020 a separate IRC section 382 analysis with respect to the NOLs and tax credits acquired from Aerohive and have determined that while the Company will be subject to an annual limitation, the Company should not be limited on the full utilization of the losses and credits during the statutory allowable carryforward period for the NOLs and credits. As of June 30, 2021, cumulative undistributed, indefinitely reinvested earnings of non-U.S. subsidiaries totaled $29.1 million. It has been the Company’s historical policy to invest the earnings of certain foreign subsidiaries indefinitely outside the U.S. The Company has reviewed its prior position on the reinvestment of earnings of certain foreign subsidiaries and has recorded a deferred tax liability of $0.6 million related to withholding taxes that may be incurred upon repatriation of earnings from jurisdictions where no indefinite reinvestment assertion is made. The Company continues to maintain an indefinite reinvestment assertion for earnings in certain of its foreign jurisdictions. The unrecorded deferred tax liability for potential tax associated with repatriation of these earnings as well as the deemed repatriation related to U.S. tax reform enacted in 2017 is $5.3 million. The Company conducts business globally and as a result, most of its subsidiaries file income tax returns in various domestic and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. Its major tax jurisdictions are the U.S., Ireland, India, California, New Hampshire, Texas and North Carolina. In general, the Company's U.S. federal income tax returns are subject to examination by tax authorities for fiscal years ended June 2001 forward due to net operating losses and the Company's state income tax returns are subject to examination for fiscal years ended June 2000 forward due to net operating losses. Statutes related to material foreign jurisdictions are generally open for fiscal years ended June 2017 forward for Ireland and for tax year ended March 2018 forward for India. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law in the United States. The CARES Act, among other things, includes modifications to net operating loss carryforward provisions and net interest expense deductions, and allows deferment of employer social security tax payments. The Company evaluated the provisions of the CARES Act and how certain elections may impact our financial position and results of operations, and have determined the enactment of the CARES Act did not have a material impact to the income tax provision for the fiscal year ended June 30, 2020, or to the net deferred tax assets as of June 30, 2020. The U.S. tax rules require U.S. tax on foreign earnings, known as Global Intangible Low Taxed Income (“GILTI”). Under U.S. GAAP, taxpayers are allowed to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company has elected to account for GILTI tax as a component of tax expense in the period in which it is incurred under the period cost method. On August 9, 2019, the Company completed its acquisition of Aerohive. This acquisition was treated as a non-taxable stock acquisition and therefore Extreme Networks has carryover tax basis in the assets and liabilities acquired. During the fourth quarter of fiscal 2020 following the acquisition of Aerohive, the Company realigned the Aerohive related non-American intellectual property (“IP”) rights to correspond with the Company’s global operating model. This transaction resulted in recognition of a $75 million U.S. tax gain which was fully consumed by existing NOLs and the intangibles transferred are being amortized over 10 years for Irish statutory purposes. As of June 30, 2021, the Company had $19.1 million of unrecognized tax benefits. If fully recognized in the future, $0.4 million would impact the effective tax rate, and $18.7 million would result in adjustments to deferred tax assets and corresponding adjustments to the valuation allowance. The Company does not reasonably expect the amount of unrealized tax benefits to materially decrease during the next twelve months. The decrease in the current year related to prior year tax positions relates to the reclassification of an unrecognized tax benefit to a valuation allowance with no net impact to the financial statements. A reconciliation of the beginning and ending amount of total unrecognized tax benefits is as follows (in thousands):
Balance at June 30, 2018 |  | $ | 17,506 |
Increase related to prior year tax positions |  |  | 26 |
Lapse of statute of limitations |  |  | (364 | )
Balance at June 30, 2019 |  |  | 17,168 |
Increase related to prior year tax positions |  |  | 8,906 |
Increase related to current year tax positions |  |  | 44 |
Decrease related to prior year tax positions |  |  | (1,800 | )
Lapse of statute of limitations |  |  | (421 | )
Balance at June 30, 2020 |  |  | 23,897 |
Decrease related to prior year tax positions |  |  | (4,296 | )
Increase related to prior year tax positions |  |  | 28 |
Increase related to current year tax positions |  |  | 72 |
Lapse of statute of limitations |  |  | (637 | )
Balance at June 30, 2021 |  | $ | 19,064 |
Estimated interest and penalties related to the underpayment of income taxes, if any are classified as a component of tax expense in the consolidated statements of operations and totaled less than $0.1 million for each of the years ended 2021, 2020 and 2019.

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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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