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Income Taxes

12 Months Ended

Jun. 30, 2021

12. Income Taxes

The components of income before income taxes consisted of the following:


For the Year Ended June 30	2021		2020		2019
Domestic	$	12,684	$	(3,142)	$	2,331
Foreign		53,784		58,654		69,174
Income before income taxes	$	66,468	$	55,512	$	71,505

Components of the provision for income taxes were:


For the Year Ended June 30	2021		2020		2019
Current provision (benefit):
Federal	$	99	$	(1,271)	$	(459)
State and local		887		401		102
Foreign		13,280		14,705		16,603
Total current provision		14,266		13,835		16,246
Deferred provision (benefit):
Federal		291		5,226		858
State and local		(110)		696		432
Foreign		(2,663)		218		(691)
Change in valuation allowance–foreign		299		1,985		(53)
Total deferred provision (benefit)		(2,183)		8,125		546

Provision for income taxes	$	12,083	$	21,960	$	16,792

Reconciliation of the federal statutory rate to the Company’s effective tax rate were:


For the Year Ended June 30	2021		2020		2019
Federal income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal benefit	0.8		1.7		0.6
Foreign income tax rates	4.2		3.6		4.1
Changes in uncertain tax positions	(6.8)		5.2		(1.0)
Global Intangible Low-Taxed Income	1.3		6.2		0.8
Recognition of federal and foreign tax credits	(2.1)		(0.9)		(2.5)
Change in valuation allowance	0.5		3.6		—
Other	(0.7)		(0.8)		0.5
Effective tax rate	18.2	%	39.6	%	23.5	%

We record the Global Intangible Low-Taxed Income (GILTI) aspects of comprehensive U.S. income tax legislation as a period expense. The provision for income taxes for the years ended June 30, 2021 and 2020, included $889 and $3,453 of federal tax expense from the effects of GILTI, respectively.

The tax effects of significant temporary differences that comprise deferred tax assets and liabilities were:


As of June 30	2021		2020
Deferred tax assets:
Employee related accruals	$	6,337	$	5,703
Inventory		2,094		726
Environmental remediation		765		974
Net operating loss carry forwards–domestic		1,522		1,618
Net operating loss carry forwards–foreign		5,517		5,221
Operating lease liabilities		8,312		5,732
Other		4,672		6,340
		29,219		26,314
Valuation allowance		(3,709)		(3,403)
		25,510		22,911
Deferred tax liabilities:
Property, plant and equipment and intangible assets		(7,550)		(6,108)
Operating lease ROU assets		(8,251)		(5,657)
Other		(793)		(921)
		(16,594)		(12,686)

Net deferred tax asset	$	8,916	$	10,225

Deferred taxes are included in the consolidated balance sheets as follows:


As of June 30	2021		2020
Other assets	$	9,861	$	11,430
Other liabilities		(945)		(1,205)
	$	8,916	$	10,225

The valuation allowance established against the deferred tax assets were:


	2021		2020		2019
Balance at beginning of period	$	3,403	$	808	$	861
Provision for income taxes		306		2,595		(53)
Balance at end of period	$	3,709	$	3,403	$	808

The Company records valuation allowance against certain foreign and state deferred tax assets, after considering all of the available evidence, it is more likely than not that these assets will not be realized.

The Company has $31,319 of state net operating loss carry forwards. $13,803 that will expire in 2022 through 2039, and $17,516 that do not expire, and $27,481 of foreign net operating loss carry forwards of which most are in jurisdictions that have no expiration.

If amounts are repatriated from certain of our foreign subsidiaries, we could be subject to additional non-U.S. income and withholding taxes. We consider undistributed earnings of such foreign subsidiaries to be indefinitely reinvested. At June 30, 2021, our cash and cash equivalents and short-term investments included $91,601 held by our international subsidiaries. We do not provide income taxes for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.

As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon examination. Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. Substantially all of these unrecognized tax benefits, if recognized, would reduce our effective income tax rate.

Reconciliations of the beginning and ending amounts of gross unrecognized tax benefits are as follows:


As of June 30	2021		2020		2019
Unrecognized tax benefits–beginning of period	$	9,507	$	6,343	$	7,000
Tax position changes–current period		1,873		2,850		528
Tax position changes–prior periods, including settlements with tax authorities		(5,354)		108		(317)
Lapse of statute of limitations		(1,109)		—		(1,053)
Translation		394		206		185
Unrecognized tax benefits–end of period		5,311		9,507		6,343
Interest and penalties–end of period		391		969		750
Total liabilities related to uncertain tax positions	$	5,702	$	10,476	$	7,093

We recognize interest and penalties associated with uncertain tax positions as a component of the provision for income taxes. We recognized and recorded interest and penalties expense of $69, $214, and $94 for 2021, 2020 and 2019, respectively.

Income tax returns for the following periods are no longer subject to examination by the relevant tax authorities:

●

U.S. federal and significant states, through June 30, 2008;

●

Brazil, through December 31, 2015;

●

Israel, through June 30, 2016, for certain subsidiaries and through June 30, 2019, for certain subsidiaries.

- 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.

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