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Income Taxes | 12 Months Ended
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Jun. 30, 2021
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,
| 2021 |  | 2020 |  | 2019
U.S. | $ | 2,546 |  |  | $ | (58,765) |  |  | $ | (10,879) |
Non-U.S. | (58,582) |  |  | 61,768 |  |  | 137,791 |
Total | $ | (56,036) |  |  | $ | 3,003 |  |  | $ | 126,912 |
The components of the provision (benefit) for income taxes are as follows:
| Year Ended June 30,
| 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
U.S. Federal | $ | (93) |  |  | $ | (16,269) |  |  | $ | 84 |
U.S. State | 546 |  |  | 213 |  |  | 1,130 |
Non-U.S. | 28,205 |  |  | 22,361 |  |  | 26,862 |
Total current | 28,658 |  |  | 6,305 |  |  | 28,076 |
Deferred: |  |  |  |  |
U.S. Federal | (1,573) |  |  | 12,980 |  |  | (1,347) |
U.S. State | (31) |  |  | 3,213 |  |  | (183) |
Non-U.S. | (8,151) |  |  | (103,490) |  |  | 6,886 |
Total deferred | (9,755) |  |  | (87,297) |  |  | 5,356 |
Total | $ | 18,903 |  |  | $ | (80,992) |  |  | $ | 33,432 |
The following is a reconciliation of the standard U.S. federal statutory tax rate and our effective tax rate:
| Year Ended June 30,
| 2021 |  | 2020 |  | 2019
U.S. federal statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal effect | 3.6 |  |  | (130.1) |  |  | (1.0) |
Tax rate differential on non-U.S. earnings | (21.8) |  |  | (408.4) |  |  | (7.2) |
Swiss tax reform | — |  |  | (3,779.0) |  |  | — |
Compensation related items | 0.2 |  |  | (420.7) |  |  | 0.7 |
U.S. tax reform | — |  |  | (372.6) |  |  | 3.7 |
Goodwill impairment | — |  |  | 759.1 |  |  | 2.0 |
Change in valuation allowance | (30.8) |  |  | 1,277.5 |  |  | (1.7) |
Irish foreign tax credit | 10.0 |  |  | 262.3 |  |  | (19.1) |
Tax on repatriated earnings | (4.4) |  |  | 154.1 |  |  | 8.0 |
Gain/loss on sale of subsidiary | — |  |  | (189.2) |  |  | — |
Notional interest deduction (Italy) | 1.6 |  |  | (47.9) |  |  | (0.8) |
Patent box (Italy) | — |  |  | (24.2) |  |  | (3.4) |
Tax credits and incentives | 4.0 |  |  | (88.3) |  |  | (3.6) |
Non-US tax rate changes | 1.4 |  |  | 81.7 |  |  | 0.1 |
Business and withholding taxes | (0.4) |  |  | 28.7 |  |  | 0.8 |
Uncertain tax positions | (1.1) |  |  | 28.8 |  |  | (0.1) |
Nondeductible interest expense | (19.4) |  |  | 157.4 |  |  | 1.3 |
Other non-deductible expenses | 0.6 |  |  | 47.5 |  |  | 1.5 |
Tax on unremitted earnings | (1.0) |  |  | 31.4 |  |  | 8.0 |
Change in tax residence | — |  |  | — |  |  | 20.5 |
Changes to variable interest entities | — |  |  | — |  |  | (2.5) |
Changes to derivative instruments | 1.8 |  |  | — |  |  | 4.5 |
Other | 1.0 |  |  | (86.1) |  |  | (6.4) |
Effective income tax rate | (33.7) | % |  | (2,697.0) | % |  | 26.3 | %
For the year ended June 30, 2021, our effective tax rate was below our U.S. federal statutory tax rate primarily due to non-deductible interest expense 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, Canada, France, Germany, India, Ireland, Italy, the Netherlands, Spain and Switzerland. The applicable tax rates in these jurisdictions range from 10% to 30%. 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, 2021, our effective tax rate was (33.7)% as compared to the prior year effective tax rate of (2,697.0)%. The increase in our effective tax rate as compared to the prior year is primarily due to Swiss Tax Reform benefits of $113,482 in the year ended June 30, 2020. Also, in addition to decreased pre-tax profits and a less favorable mix of earnings year over year, we recognized tax benefits of $2,143 related to excess tax benefits from share based compensation, as compared to $15,705 in fiscal year 2020. During the year ended June 30, 2021 we recognized a tax benefit of $6,700 for the release of our valuation allowance in India as a result of increased profitability. Additionally in fiscal year 2020, we recognized tax benefits of $11,188 for the re-measurement of U.S. tax losses that were carried back to tax years with higher U.S. federal tax rates under the US CARES Act and 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. Our fiscal year 2020 effective tax rate was lower than fiscal year 2019 primarily due to Swiss Tax Reform. 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 do not expect to realize the majority of this benefit until fiscal year 2025 through fiscal year 2030. Significant components of our deferred income tax assets and liabilities consisted of the following at June 30, 2021 and 2020:
| June 30, 2021 |  | June 30, 2020
Deferred tax assets: |  |  |
Swiss tax reform amortizable goodwill | $ | 124,372 |  |  | $ | 127,965 |
Net operating loss carryforwards | 73,534 |  |  | 62,374 |
Leases | 31,363 |  |  | 33,078 |
Depreciation and amortization | 9,136 |  |  | 4,308 |
Accrued expenses | 9,538 |  |  | 6,253 |
Share-based compensation | 11,192 |  |  | 9,482 |
Credit and other carryforwards | 39,109 |  |  | 29,216 |
Derivative financial instruments | 8,226 |  |  | 6,739 |
Other | 5,774 |  |  | 7,551 |
Subtotal | 312,244 |  |  | 286,966 |
Valuation allowance | (113,917) |  |  | (91,575) |
Total deferred tax assets | 198,327 |  |  | 195,391 |
Deferred tax liabilities: |  |  |
Depreciation and amortization | (28,187) |  |  | (41,017) |
Leases | (24,920) |  |  | (30,433) |
Investment in flow-through entity | (5,003) |  |  | (3,550) |
Tax on unremitted earnings | (6,877) |  |  | (6,203) |
Italy tax suspension reserve | (4,528) |  |  | — |
Other | (6,627) |  |  | (4,502) |
Total deferred tax liabilities | (76,142) |  |  | (85,705) |
Net deferred tax assets | $ | 122,185 |  |  | $ | 109,686 |
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 France) 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. Also, Cimpress plc generated $5,587 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. Other increases in our valuation allowance include increased U.S. research and development credits of $3,209 and acquired net operating losses of $5,424. The increase in valuation allowance was offset by the release of Indian valuation allowance of $6,700. We have recorded a full valuation allowance against $8,226 of deferred tax asset related to derivative financial instruments 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 has been recorded in accumulated other comprehensive loss on the balance sheet. Additionally, we have recorded valuation allowances of $25,389 and $3,805 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 not recorded a valuation allowance against $14,235 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, 2021, 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, 2021 is as follows:
Balance at June 30, 2020 | $ | 91,575 |
Charges to earnings (1) | 17,214 |
Charges to other accounts (2) | 5,128 |
Balance at June 30, 2021 | $ | 113,917 |
_________________ (1) Amount is primarily related to increased U.S. and non-U.S. net operating losses, increased U.S. research and development credits, increased Irish foreign tax credits, and release of India valuation allowance. (2) Amount is primarily related to increase in deferred tax assets on non-U.S. net operating losses due to currency exchange rate changes, acquired net operating losses recorded in purchase accounting, and unrealized losses on derivative financial instruments included in Accumulated Other Comprehensive Loss. As of June 30, 2021, we had gross U.S. federal and apportioned state net operating losses of $12,124 and $25,179, respectively, that expire on various dates from fiscal year 2024 through fiscal year 2041 or with unlimited carryforward. We also had gross non-U.S. net operating loss carryforwards of $422,072, a significant amount of which begin to expire in fiscal year 2024, with the remaining amounts expiring on various dates from fiscal year 2022 through fiscal year 2030 or with unlimited carryforward. In addition, we had $30,693 of tax credit carryforwards primarily related to U.S. federal and state research and development credits, which expire on various dates beginning in fiscal year 2031 or with unlimited carryforward. We also had $18,118, $7,934 and $3,291 of U.S. federal, apportioned state, and non-U.S. capital loss carryforwards, respectively. The U.S. capital losses expire in fiscal year 2025 and the non-U.S. capital losses have unlimited carryforward. Lastly, we had $8,030 of Irish foreign tax credits with unlimited carryforward. 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, 2021, no tax provision has been made for $43,401 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 $10,000 to $11,000 at that time. A cumulative deferred tax liability of $6,877 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 through August 2022. When the tax holidays expire, we will be subject to tax at rates ranging from 15% to 30%. As a result of the tax holidays, our net income was higher by $181 for fiscal year 2021. A reconciliation of the gross beginning and ending amount of unrecognized tax benefits is as follows:
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 |
Additions based on tax positions related to the current tax year | 1,428 |
Additions based on tax positions related to prior tax years | 7,448 |
Reductions based on tax positions related to prior tax years | (51) |
Reductions due to audit settlements | (83) |
Reductions due to lapse of statute of limitations | (229) |
Cumulative translation adjustment | 19 |
Balance June 30, 2021 | $ | 14,379 |
For the year ended June 30, 2021, the amount of unrecognized tax benefits (exclusive of interest) that, if recognized, would impact the effective tax rate is $1,307. 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, 2021, 2020 and 2019 were $1,014, $384 and $515, respectively. It is reasonably possible that a further change in unrecognized tax benefits in the range of $300 to $310 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 2020 remain open for examination by the United States Internal Revenue Service ("IRS") and the years 2015 through 2020 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://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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