
(in thousands)	2021			2020			2019
Income (loss) before income taxes:
United States	$	(60,775)		$	(76,107)		$	60,756
International	125,435			78,067			250,479
Total income before income taxes	$	64,660		$	1,960		$	311,235
Current income taxes:
Federal	$	39		$	(3,558)		$	5,679
State	133			905			321
International	30,726			33,559			54,553
Total current income taxes	30,898			30,906			60,553
Deferred income taxes:
Federal	$	(23,170)		$	(9,113)		$	(3,606)
State	(2,948)			724			45
International	1,463			(15,510)			6,367
Total deferred income taxes:	(24,655)			(23,899)			2,806
Provision for income taxes	$	6,243		$	7,007		$	63,359
Effective tax rate	9.7		%	357.5		%	20.4		%

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, allows net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes; permits net operating loss carryovers and carrybacks to offset 100 percent of taxable income for taxable years beginning before January 1, 2021; and modifies the limitation on business interest by increasing the allowable business interest deduction from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income for taxable years beginning in 2019 or 2020. We carried back our taxable loss in the U.S. for fiscal 2020 under the provisions of the CARES Act and recorded a benefit in our tax provision during fiscal 2020.

Legislation was effectively enacted during the December quarter of fiscal 2020 when the Canton of Schaffhausen approved the Federal Act on Tax Reform and AHV Financing on October 8, 2019 (Swiss tax reform). Significant changes from Swiss tax reform include the abolishment of certain favorable tax regimes and the creation of a multi-year transitional period at both the federal and cantonal levels.

The transitional provisions of Swiss tax reform allow companies to utilize a combination of lower tax rates and tax basis adjustments to fair value, which are used for tax depreciation and amortization purposes resulting in deductions over the transitional period. To reflect the federal and cantonal transitional provisions, as they apply to us, we recorded a deferred tax asset of $14.5 million during the December quarter of fiscal 2020. We consider the deferred tax asset from Swiss tax reform to be an estimate based on our current interpretation of the legislation, which is subject to change based on further legislative guidance, review with the Swiss federal and cantonal authorities, and modifications to the underlying valuation. We anticipate finalization of the deferred tax asset within the next twelve months.

The reconciliation of income taxes computed using the statutory U.S. income tax rate and the provision for income taxes was as follows for the years ended June 30:


(in thousands)	2021		2020		2019
Income taxes at U.S. statutory rate	$	13,579	$	412	$	65,359
State income taxes, net of federal tax benefit	(1,725)		1,283		289
U.S. income taxes provided on international income	(6,479)		12,422		7,347
Combined tax effects of international income	5,860		10,583		162
Impact of goodwill impairment charges	—		5,651		—

Change in valuation allowance and other uncertain tax positions	1,127		755		(1,473)

U.S. research and development credit	(3,055)		(4,093)		(3,911)
Change in permanent reinvestment assertion	—		—		6,093
Combined effects of U.S. tax reform	—		—		(9,280)
Combined effects of Swiss tax reform	—		(14,500)		—
Combined effects of the U.S. CARES Act	—		(6,913)		—
Recognition of stranded deferred tax balance	(3,465)		—		—

Other	401		1,407		(1,227)
Provision for income taxes	$	6,243	$	7,007	$	63,359

During 2021, we recorded a tax benefit of $3.5 million for the recognition of a stranded deferred tax balance in accumulated other comprehensive loss associated with the forward starting interest rate swap contracts that were terminated when the 2022 Senior Notes were extinguished. The impact of this item is included in the tax reconciliation table under the caption “Recognition of stranded deferred tax balance” and in the consolidated statements of cash flows as a non-cash item within the caption "Debt refinancing charge."

During 2021, we recorded a net tax benefit of $9.3 million related to a tax election made in our fiscal 2020 U.S. income tax return pursuant to global intangible low-taxed income (GILTI) regulations which were issued during the current fiscal year. The impact of this item is included in the tax reconciliation table under the caption “U.S. income taxes provided on international income.”

During 2019, we recorded a net tax benefit of $9.3 million associated with the finalization of our toll tax charge which included a benefit of $14.5 million for the toll tax charge and a $5.3 million charge for an unrecognized tax benefit. The effect of these items is included in the tax reconciliation table under the caption “Combined effects of U.S. tax reform.”

During 2019, we released a $1.1 million valuation allowance that was previously recorded against the net deferred tax assets of our Australian subsidiary. The effect of this item is included in the tax reconciliation table under the caption “Change in valuation allowance and other uncertain tax positions.”

The components of net deferred tax assets and liabilities were as follows at June 30:


(in thousands)	2021		2020
Deferred tax assets:
Net operating loss (NOL) carryforwards	$	44,258	$	31,891
Inventory valuation and reserves	11,068		8,220
Pension benefits	7,136		19,608
Other postretirement benefits	3,486		4,110
Accrued employee benefits	11,168		11,650
Operating lease liabilities	12,652		11,889
Other accrued liabilities	15,596		7,310
Tax credits and other carryforwards	32,490		21,048
Intangible assets	7,784		10,531
Other	—		364
Total	145,638		126,621
Valuation allowance	21,263		16,654
Total deferred tax assets	$	124,375	$	109,967
Deferred tax liabilities:
Tax depreciation in excess of book	$	63,020	$	67,411
Operating lease right-of-use assets	12,502		11,715

Unremitted earnings not permanently reinvested	6,429		5,855
Other	$	7,392	—
Total deferred tax liabilities	$	89,343	$	84,981
Total net deferred tax assets (liabilities)	$	35,032	$	24,986

As of June 30, 2021, we have $26.3 million of U.S. net deferred tax assets. Within this amount is $57.0 million related to net operating loss, tax credit, and other carryforwards that can be used to offset future U.S. taxable income. Certain of these carryforwards will expire if they are not used within a specified timeframe. At this time, we consider it more likely than not that we will have sufficient U.S. taxable income in the future that will allow us to realize these net deferred tax assets. However, it is possible that some or all of these tax attributes could ultimately expire unused, especially if our end markets do not continue to recover from the COVID-19 global pandemic. Therefore, if we are unable to generate sufficient U.S. taxable income from our operations, a valuation allowance to reduce the U.S. net deferred tax assets may be required, which would materially increase income tax expense in the period in which the valuation allowance is recorded.

Included in deferred tax assets at June 30, 2021 is $32.5 million associated with tax credits and other carryforward items in the U.S. Of that amount, $0.7 million expires through 2031, $4.6 million expires through 2036, $18.3 million expires through 2041, $2.6 million does not expire, and $6.3 million is amortizable over eight years.

Included in deferred tax assets at June 30, 2021 is $44.3 million associated with NOL carryforwards in U.S. federal, state and foreign jurisdictions. Of that amount, $8.1 million expires through 2026, $2.2 million expires through 2031, $2.7 million expires through 2036, $3.8 million expires through 2041, and the remaining $27.5 million does not expire. The realization of these tax benefits is primarily dependent on future taxable income in these jurisdictions.

A valuation allowance of $21.3 million has been placed against deferred tax assets primarily in U.S. state, Brazil and Bolivia jurisdictions, all of which would be allocated to income tax expense upon realization of the deferred tax assets. As the respective operations generate sufficient income, the valuation allowances will be partially or fully reversed at such time we believe it will be more likely than not that the deferred tax assets will be realized. In 2021, the valuation allowance related to these deferred tax assets increased by $4.6 million.

We consider the majority of the $1.5 billion unremitted earnings of our non-U.S. subsidiaries to be permanently reinvested. With regard to these unremitted earnings, we have not, nor do we anticipate the need to, repatriate funds to the U.S. to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested earnings is not practicable due to our legal entity structure and the complexity of U.S. and local tax laws. With regard to the small portion of unremitted earnings that are not indefinitely reinvested, we maintain a deferred tax liability for foreign withholding and U.S. state income taxes. The deferred tax liability associated with unremitted earnings of our non-U.S. subsidiaries not permanently reinvested is $6.4 million as of June 30, 2021.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalty) is as follows as of June 30:


(in thousands)	2021		2020		2019
Balance at beginning of year	$	8,680	$	8,952	$	5,775
Increases for tax positions of prior years	—		—		7,384


Decreases related to settlement with taxing authority	—		—		(3,765)
Decreases related to lapse of statute of limitations	(229)		(214)		(324)
Foreign currency translation	205		(58)		(118)
Balance at end of year	$	8,656	$	8,680	$	8,952

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in 2021, 2020 and 2019 is $8.7 million, $8.7 million and $9.0 million, respectively. We believe that it is reasonably possible that the amount of unrecognized tax benefits will decrease by approximately $5.3 million within the next twelve months.

Our policy is to recognize interest and penalties related to income taxes as a component of the provision for income taxes in the consolidated statements of income. We recognized a decrease of $0.2 million and $0.4 million in 2021 and 2019, respectively, and an increase of $1.0 million in 2020. As of June 30, 2021 and 2020, the amount of interest accrued was $1.4 million and $1.2 million, respectively. As of June 30, 2021 there was no penalty accrued and at June 30, 2020, the amount of penalty accrued was $0.5 million.