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Income Taxes | 12 Months Ended
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Jun. 30, 2020
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | Income Taxes The following is a summary of our income (loss) before income taxes by geography:
| Year Ended June 30,
| 2020 |  | 2019 |  | 2018
U.S. | $ | (58,765 | ) |  | $ | (10,879 | ) |  | $ | 9,183 |
Non-U.S. | 61,768 |  |  | 137,791 |  |  | 57,183 |
Total | $ | 3,003 |  |  | $ | 126,912 |  |  | $ | 66,366 |
The components of the provision (benefit) for income taxes are as follows:
| Year Ended June 30,
| 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |  |  |  |
U.S. Federal | $ | (16,269 | ) |  | $ | 84 |  |  | $ | 446 |
U.S. State | 213 |  |  | 1,130 |  |  | (117 | )
Non-U.S. | 22,361 |  |  | 26,862 |  |  | 33,065 |
Total current | 6,305 |  |  | 28,076 |  |  | 33,394 |
Deferred: |  |  |  |  |  |  |  |
U.S. Federal | 12,980 |  |  | (1,347 | ) |  | (6,673 | )
U.S. State | 3,213 |  |  | (183 | ) |  | 2,306 |
Non-U.S. | (103,490 | ) |  | 6,886 |  |  | (9,449 | )
Total deferred | (87,297 | ) |  | 5,356 |  |  | (13,816 | )
Total | $ | (80,992 | ) |  | $ | 33,432 |  |  | $ | 19,578 |
The following is a reconciliation of the standard U.S. federal statutory tax rate and our effective tax rate:
| Year Ended June 30,
| 2020 |  | 2019 |  | 2018
U.S. federal statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 28.0 | %
State taxes, net of federal effect | (130.1 | ) |  | (1.0 | ) |  | (2.4 | )
Tax rate differential on non-U.S. earnings | (408.4 | ) |  | (7.2 | ) |  | (1.3 | )
Swiss tax reform | (3,779.0 | ) |  | — |  |  | — |
Compensation related items | (420.7 | ) |  | 0.7 |  |  | (15.1 | )
U.S. tax reform | (372.6 | ) |  | 3.7 |  |  | 10.4 |
Goodwill impairment | 759.1 |  |  | 2.0 |  |  | — |
Change in valuation allowance | 1,277.5 |  |  | (1.7 | ) |  | 6.7 |
Irish foreign tax credit | 262.3 |  |  | (19.1 | ) |  | — |
Tax on repatriated earnings | 154.1 |  |  | 8.0 |  |  | — |
Gain/loss on sale of subsidiary | (189.2 | ) |  | — |  |  | 4.0 |
Notional interest deduction (Italy) | (47.9 | ) |  | (0.8 | ) |  | (1.9 | )
Patent box (Italy) | (24.2 | ) |  | (3.4 | ) |  | — |
Tax credits and incentives | (88.3 | ) |  | (3.6 | ) |  | (4.8 | )
Non-US tax rate changes | 81.7 |  |  | 0.1 |  |  | (0.1 | )
Business and withholding taxes | 28.7 |  |  | 0.8 |  |  | 0.8 |
Uncertain Tax Positions | 28.8 |  |  | (0.1 | ) |  | (1.1 | )
Nondeductible interest expense | 157.4 |  |  | 1.3 |  |  | 2.9 |
Other non-deductible expenses | 47.5 |  |  | 1.5 |  |  | (0.1 | )
Tax on unremitted earnings | 31.4 |  |  | 8.0 |  |  | 0.7 |
Change in tax residence | — |  |  | 20.5 |  |  | — |
Nondeductible acquisition-related payments | — |  |  | 0.6 |  |  | 3.6 |
Changes to variable interest entities | — |  |  | (2.5 | ) |  | — |
Changes to derivative instruments | — |  |  | 4.5 |  |  | — |
Other | (86.1 | ) |  | (7.0 | ) |  | (0.8 | )
Effective income tax rate | (2,697.0 | )% |  | 26.3 | % |  | 29.5 | %
For the year ended June 30, 2020, our effective tax rate was significantly impacted by Swiss Tax Reform, as discussed in more detail below. Without the Swiss Tax Reform benefit, our effective tax rate for the year was above our U.S. federal statutory tax rate primarily due to non-deductible goodwill impairments and losses in certain jurisdictions for which we cannot recognize a tax benefit. The jurisdictions that have the most significant impact to our non-U.S. tax provision include Australia, Austria, Canada, France, Germany, Ireland, Italy, Mexico, the Netherlands, Spain and Switzerland. The applicable tax rates in these jurisdictions range from 10% to 32%. The total tax rate benefit from operating in non-U.S. jurisdictions is included in the line “Tax rate differential on non-U.S. earnings” in the above tax rate reconciliation table. For the year ended June 30, 2020, our effective tax rate was (2,697.0)% as compared to the prior year effective tax rate of 26.3%. The decrease in our effective tax rate as compared to the prior year is primarily due to Swiss Tax Reform. Also, in addition to a more favorable mix of earnings year-over-year, we recognized tax benefits of $15,705 related to excess tax benefits from share based compensation, as compared to $1,539 in fiscal 2019, and $11,188 for the re-measurement of U.S. tax losses that will be carried back to tax years with higher U.S. federal tax rates under the US CARES Act. We also recognized tax expense of $41,900 to record a full valuation allowance against our U.S. deferred tax assets and a portion for our Irish deferred tax assets. The change in judgment to no longer recognize the deferred tax assets was driven by decreased profits due to impacts of the COVID-19 pandemic and goodwill impairments. During fiscal 2020 we recognized "Patent Box" tax benefits granted to our Pixartprinting business in Italy of $728, as compared to $4,260 in fiscal 2019 representing three years' worth of benefits. Our fiscal year 2019 effective tax rate was lower than fiscal year 2018 primarily due a more favorable geographic mix on increased profits and the Italian Patent Box benefits, offset by decreased share-based compensation tax benefits of $1,539 as compared to $12,802 in fiscal 2018. On October 25, 2019, the canton of Zurich enacted tax law changes by publishing the results of its referendum to adopt the Federal Act on Tax Reform and AHV Financing (TRAF), which we refer to as Swiss Tax Reform. Swiss Tax Reform was effective as of January 1, 2020 and included the abolishment of various favorable federal and cantonal tax regimes. Swiss Tax Reform provided transitional relief measures for companies that lost the tax benefit of a ruling, including a "step-up" for amortizable goodwill, equal to the amount of future tax benefit they would have received under their existing ruling, subject to certain limitations. We recognized a tax benefit of $113,482 to establish new Swiss deferred tax assets related to transitional relief measures and to remeasure our existing Swiss deferred tax assets and liabilities. We don't expect to realize the majority of this benefit until fiscal 2025 through fiscal 2030. Significant components of our deferred income tax assets and liabilities consisted of the following at June 30, 2020 and 2019:
| June 30, 2020 |  | June 30, 2019
Deferred tax assets: |  |  |  |  |
Swiss tax reform amortizable goodwill | $ | 127,965 |  |  | $ | — |
Net operating loss carryforwards | 62,374 |  |  | 80,832 |
Capital leases | 33,078 |  |  | 31,010 |
Depreciation and amortization | 4,308 |  |  | 3,315 |
Accrued expenses | 6,253 |  |  | 6,441 |
Share-based compensation | 9,482 |  |  | 11,241 |
Credit and other carryforwards | 29,216 |  |  | 24,714 |
Derivative financial instruments | 6,739 |  |  | 2,924 |
Other | 7,551 |  |  | 3,167 |
Subtotal | 286,966 |  |  | 163,644 |
Valuation allowance | (91,575 | ) |  | (59,410 | )
Total deferred tax assets | 195,391 |  |  | 104,234 |
Deferred tax liabilities: |  |  |  |  |
Depreciation and amortization | (41,017 | ) |  | (50,091 | )
Capital leases | (30,433 | ) |  | (27,694 | )
Investment in flow-through entity | (3,550 | ) |  | (3,078 | )
Tax on unremitted earnings | (6,203 | ) |  | (5,145 | )
Other | (4,502 | ) |  | (2,851 | )
Total deferred tax liabilities | (85,705 | ) |  | (88,859 | )
Net deferred tax assets | $ | 109,686 |  |  | $ | 15,375 |
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. The increase in the valuation allowance from the prior year relates primarily to losses in certain jurisdictions (mainly the United States, Ireland, Brazil, China, Japan, and the United Kingdom) for which management has determined we cannot recognize the related deferred tax assets based on trailing three-year pre-tax profit or loss adjusted for permanent book versus tax differences. In addition, losses on certain of our derivative financial instruments grew, resulting in an additional increase to the valuation allowance. Also, Cimpress plc generated $2,442 of Irish foreign tax credit carryforwards which do not expire, but for which management has determined it is more likely than not that these will not be utilized upon future repatriation. Offsetting the overall increase in the valuation allowance, we wrote-off deferred tax assets of $14,240 and the corresponding valuation allowance related to Cimpress N.V.'s Irish foreign tax credit carryforwards as these do not transfer to Cimpress plc subsequent to the Irish Merger. We have recorded a full valuation allowance against $6,739 of deferred tax asset related to interest rate swaps for which management has determined that it is more likely than not that the deferred tax asset will not be recognized in the foreseeable future. The impact of this deferred tax asset and associated valuation allowance of $5,213 has been recorded in Accumulated Other Comprehensive Loss on the balance sheet. The remaining valuation allowance of $1,526 was recorded to continuing operations. Additionally, we have recorded valuation allowances of $22,180 and $4,114 against deferred tax assets related to U.S. research and development credits and U.S. capital loss carryforwards, respectively, for which management has determined that it is more likely than not that these will not be utilized within the applicable carryforward periods available under local law. We have recorded a partial valuation allowance of $1,149 related to the Swiss Tax Reform amortizable goodwill deferred tax asset as our current projections indicate we may not be able to utilize the full benefit. We have not recorded a valuation allowance against $20,036 of deferred tax asset associated with prior year tax losses generated in Switzerland. Management believes there is sufficient positive evidence in the form of historical and future projected profitability to conclude that it is more likely than not that all of the losses in Switzerland will be utilized against future taxable profits within the available carryforward period. Our assessments are reliant on the attainment of our future operating profit goals. Failure to achieve these operating profit goals may change our assessment of these deferred tax assets, and such change would result in additional valuation allowance and an increase in income tax expense to be recorded in the period of the change in assessment. We will continue to review our forecasts and profitability trends on a quarterly basis. Based on the weight of available evidence at June 30, 2020, management believes that it is more likely than not that all other net deferred tax assets will be realized in the foreseeable future. We will continue to assess the realization of the deferred tax assets based on operating results on a quarterly basis. A reconciliation of the beginning and ending amount of the valuation allowance for the year ended June 30, 2020 is as follows:
Balance at June 30, 2019 | $ | 59,410 |
Charges to earnings (1) | 36,833 |
Charges to other accounts (2) | (6,198 | )
Balance at June 30, 2020 | $ | 90,045 |
_________________ (1) Amount is primarily related to U.S. research and development credits and capital loss carryforwards, U.S. and non-U.S. net operating losses, Irish foreign tax credits and Swiss tax reform amortizable goodwill. (2) Amount is primarily related to decrease in deferred tax assets on non-U.S. net operating losses due to currency exchange rate changes and sale of VIDA, offset by unrealized losses on interest rate swaps included in Accumulated Other Comprehensive Loss. As of June 30, 2020, we had gross U.S. federal and apportioned state net operating losses of approximately $41,107 that expire on various dates from fiscal 2036 through fiscal 2040 or with unlimited carryforward. We also had gross non-U.S. net operating loss carryforwards of $426,027, a significant amount of which begin to expire in fiscal 2023, with the remaining amounts expiring on various dates from fiscal 2021 through fiscal 2029 or with unlimited carryforward. In addition, we had $26,814 of tax credit carryforwards primarily related to U.S. federal and state research and development credits, which expire on various dates beginning in fiscal 2031 or with unlimited carryforward. Lastly, we had $18,164 and $5,662 of U.S. federal and apportioned state capital loss carryforwards, respectively, which expire in fiscal 2025. The benefits of these carryforwards are dependent upon the generation of taxable income in the jurisdictions where they arose. We consider the following factors, among others, in evaluating our plans for indefinite reinvestment of our subsidiaries’ earnings: (i) the forecasts, budgets and financial requirements of both our parent company and its subsidiaries, both for the long term and for the short term; (ii) the ability of Cimpress plc to fund its operations and obligations with earnings from other businesses within the global group without incurring substantial tax costs; and (iii) the tax consequences of any decision to reinvest earnings of any subsidiary. As of June 30, 2020, no tax provision has been made for $36,584 of undistributed earnings of certain of our subsidiaries as these earnings are considered indefinitely reinvested. If, in the future, we decide to repatriate the undistributed earnings from these subsidiaries in the form of dividends or otherwise, we could be subject to withholding taxes payable in the range of $9,000 to $10,000 at that time. A cumulative deferred tax liability of $6,203 has been recorded attributable to undistributed earnings that we have deemed are not indefinitely reinvested. The remaining undistributed earnings of our subsidiaries are not deemed to be indefinitely reinvested and can be repatriated with no tax cost. Accordingly, there has been no provision for income or withholding taxes on these earnings. We currently benefit from various income tax holidays in certain jurisdictions. The tax holidays expire on various dates from October 2020 through August 2022. When the tax holidays expire, we will be subject to tax at rates ranging from 10% to 30%. As a result of the tax holidays, our net income was higher by $457 for fiscal 2020. A reconciliation of the gross beginning and ending amount of unrecognized tax benefits is as follows:
Balance June 30, 2017 | $ | 5,383 |
Additions based on tax positions related to the current tax year | 612 |
Additions based on tax positions related to prior tax years | 93 |
Reductions based on tax positions related to prior tax years | (261 | )
Reductions due to audit settlements | (31 | )
Reductions due to lapse of statute of limitations | (1,105 | )
Cumulative translation adjustment | 14 |
Balance June 30, 2018 | 4,705 |
Additions based on tax positions related to the current tax year | 702 |
Additions based on tax positions related to prior tax years | 201 |
Reductions based on tax positions related to prior tax years | (117 | )
Reductions due to lapse of statute of limitations | (763 | )
Cumulative translation adjustment | (7 | )
Balance June 30, 2019 | 4,721 |
Additions based on tax positions related to the current tax year | 586 |
Additions based on tax positions related to prior tax years | 769 |
Reductions based on tax positions related to prior tax years | (102 | )
Reductions due to audit settlements | (52 | )
Reductions due to lapse of statute of limitations | (71 | )
Cumulative translation adjustment | (4 | )
Balance June 30, 2020 | $ | 5,847 |
For the year ended June 30, 2020, the amount of unrecognized tax benefits (exclusive of interest) that, if recognized, would impact the effective tax rate is $912. We recognize interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. The accrued interest and penalties recognized as of June 30, 2020, 2019 and 2018 were $384, $515 and $448, respectively. It is reasonably possible that a further change in unrecognized tax benefits in the range of $165 to $450 may occur within the next twelve months related to the settlement of one or more audits or the lapse of applicable statutes of limitations. We believe we have appropriately provided for all tax uncertainties. We conduct business in a number of tax jurisdictions and, as such, are required to file income tax returns in multiple jurisdictions globally. The years 2014 through 2019 remain open for examination by the United States Internal Revenue Service (“IRS”) and the years 2014 through 2019 remain open for examination in the various states and non-US tax jurisdictions in which we file tax returns. We are currently under income tax audit in certain jurisdictions globally. We believe that our income tax reserves are adequately maintained taking into consideration both the technical merits of our tax return positions and ongoing developments in our income tax audits. However, the final determination of our tax return positions, if audited, is uncertain and therefore there is a possibility that final resolution of these matters could have a material impact on our results of operations or cash flows.

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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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