XML 50 R21.htm IDEA: XBRL DOCUMENT v3.23.2
Income Taxes
 12 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
The following is a summary of our (loss) income before income taxes by geography:
 Year Ended June 30,
 202320222021
U.S. $(35,508)$(7,299)$2,689 
Non-U.S. 5,286 16,630 (66,243)
Total$(30,222)$9,331 $(63,554)
The components of the provision (benefit) for income taxes are as follows:
 Year Ended June 30,
 202320222021
Current: 
U.S. Federal$1,634 $526 $(93)
U.S. State769 568 546 
Non-U.S. 39,792 36,932 28,205 
Total current42,195 38,026 28,658 
Deferred: 
U.S. Federal3,522 (3,566)(1,573)
U.S. State465 12 (31)
Non-U.S. 109,311 25,429 (8,151)
 Total deferred113,298 21,875 (9,755)
Total$155,493 $59,901 $18,903 
The following is a reconciliation of the standard U.S. federal statutory tax rate and our effective tax rate:
 Year Ended June 30,
 202320222021
U.S. federal statutory income tax rate21.0 %21.0 %21.0 %
State taxes, net of federal effect3.7 (11.1)3.1 
Tax rate differential on non-U.S. earnings(52.5)97.1 (20.3)
Change in valuation allowance(457.2)363.7 (27.2)
Nondeductible interest expense(30.2)52.7 (18.6)
Change in entity status4.0 — — 
Compensation related items(13.7)21.9 0.2 
Goodwill impairment(4.1)— — 
Irish foreign tax credit21.4 (46.8)8.8 
Tax on repatriated earnings(15.0)39.2 (3.9)
Gain on the extinguishment of debt2.8 — — 
Notional interest deduction (Italy)2.6 (8.8)1.4 
Patent box (Italy)(1.5)(12.0)— 
Tax credits and incentives24.1 (23.7)4.2 
Non-U.S. tax rate changes(1.1)57.6 1.2 
Irish tax restructuring— (13.4)— 
U.S. global intangible low-taxed income (GILTI)— 10.2 (0.3)
U.S. foreign-derived intangible income (FDII)2.7 (6.8)— 
U.S. base erosion and anti-abuse tax (BEAT)(2.1)— — 
Net tax benefit on intellectual property transfer1.0 (10.4)— 
Tax loss carryforward expirations (5.1)4.8 (0.5)
Business and withholding taxes(1.2)5.1 (0.4)
Uncertain tax positions(10.5)35.9 (1.0)
Other non-deductible expenses(6.0)7.1 0.5 
Tax on unremitted earnings(1.6)0.1 (0.9)
Changes to derivative instruments3.1 73.5 0.1 
Other0.9 (14.9)2.9 
Effective income tax rate(514.5)%642.0 %(29.7)%
    
For the year ended June 30, 2023, our effective tax rate was below our U.S. federal statutory tax rate primarily due to establishing a full valuation allowance on Swiss deferred tax assets of $116,694 related to Swiss tax reform benefits recognized in fiscal year 2020 and Swiss tax loss carryforwards. Management concluded in the second quarter of this fiscal year that based on current period results at that time, objective and verifiable negative evidence of recent losses in Switzerland outweighed more subjective positive evidence of anticipated future income. In addition, we had 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 11% to 30%. The total tax rate impact 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, 2023, our effective tax rate was (514.5)% as compared to the prior year effective tax rate of 642.0%. The decrease in our effective tax rate as compared to the prior year is primarily due a pre-tax loss for the year ended June 30, 2023 as compared to pre-tax income in the year ended June 30, 2022. During the year ended June 30, 2023 we recognized tax expense of $116,694 to establish a full valuation allowance in Switzerland as compared to tax expense of $29,600 in the year ended June 30, 2022 to establish a partial valuation allowance in Switzerland. Our fiscal year 2022 effective tax rate was higher than fiscal year 2021 primarily due to establishing a partial valuation allowance in Switzerland.
As of June 30, 2023, we recorded a deferred tax asset of $131,472 related to Swiss tax-amortizable goodwill, which we can benefit from during fiscal year 2025 through fiscal year 2030 under our Swiss tax ruling. During the year ended June 30, 2023, the Swiss tax-amortizable goodwill deferred tax asset increased $7,579 due to currency exchange rate changes.
Significant components of our deferred income tax assets and liabilities consisted of the following at June 30, 2023 and 2022:
 June 30, 2023June 30, 2022
Deferred tax assets: 
Swiss tax-amortizable goodwill$131,472 $123,893 
Net operating loss carryforwards75,643 71,820 
Leases30,364 24,952 
Depreciation and amortization8,289 3,736 
Accrued expenses15,335 12,244 
Share-based compensation16,920 16,090 
Credit and other carryforwards58,790 47,405 
Other4,469 1,120 
Subtotal341,282 301,260 
Valuation allowance(277,976)(134,660)
Total deferred tax assets63,306 166,600 
Deferred tax liabilities: 
Depreciation and amortization(37,572)(32,595)
Leases(27,392)(21,049)
Investment in flow-through entity— (7,031)
Tax on unremitted earnings(7,221)(6,692)
Derivative financial instruments(17,091)(19,703)
Other(8,641)(7,584)
Total deferred tax liabilities(97,917)(94,654)
Net deferred tax assets$(34,611)$71,946 
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 the Swiss full valuation allowance and losses in certain jurisdictions (mainly Brazil, Japan, the Netherlands, Ireland, and the United Kingdom) for which management has determined we cannot recognize the related deferred tax assets. Also, we generated $4,202 of Irish foreign tax credit carryforwards and increased tax effected interest limitation carryforwards of $7,365 in various jurisdictions, neither of which expire, but for which management has determined it is more likely than not that these will not be utilized. The increase in valuation allowance was offset by the release of valuation allowances related to the exit of our YSD business of $3,224.

We have recorded a full valuation allowance against deferred tax assets of $22,583 and $131,472 related to Swiss tax losses and the Swiss tax-amortizable goodwill, respectively. In addition, we have recorded valuation allowances of $28,744, $5,123, and $14,768 against deferred tax assets related to U.S. research and development credits, U.S. capital loss carryforwards, and U.S. share-based compensation, respectively, for which management has determined that it is more likely than not that these will not be realized.

Based on the weight of available evidence at June 30, 2023, 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, 2023 is as follows:
Balance at June 30, 2022
$134,660 
Charges to earnings (1)138,143 
Charges to other accounts (2)5,173 
Balance at June 30, 2023
$277,976 
_________________
(1) Amount is primarily related to full Swiss valuation allowance, increased non-U.S. net operating losses, increased Irish foreign tax credits, and increased interest limitation carryforwards.
(2) Amount is primarily related to increased Swiss tax-amortizable goodwill deferred tax asset and deferred tax assets on non-U.S. net operating losses due to currency exchange rate changes offset by unrealized gains on derivative financial instruments included in accumulated other comprehensive loss.
As of June 30, 2023, we had gross U.S. federal and apportioned state net operating losses of $2,348 and $30,281, respectively, that expire on various dates from fiscal year 2024 through fiscal year 2043 or with unlimited carryforward. We also had gross non-U.S. net operating loss carryforwards of $564,818, a significant amount of which begin to expire in fiscal year 2024, with the remaining amounts expiring on various dates from fiscal year 2024 through fiscal year 2032 or having unlimited carryforward. In addition, we had $33,854 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 2030 or having unlimited carryforward. We also had $22,778, $6,130, and $1,048 of U.S. federal, apportioned U.S. state, and non-U.S. capital loss carryforwards, respectively. The U.S. capital losses expire in fiscal years 2025 through 2027 and the non-U.S. capital losses have unlimited carryforward. Lastly, we had $12,535 of Irish foreign tax credits with unlimited carryforward. The benefits of these carryforwards are dependent upon the generation of taxable income in the jurisdictions in which 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, 2023, no tax provision has been made for $56,294 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 $13,000 to $14,000 at that time. A cumulative deferred tax liability of $7,221 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. 
A reconciliation of the gross beginning and ending amount of unrecognized tax benefits is as follows:
Balance June 30, 2020$5,847 
Additions based on tax positions related to the current tax year448 
Additions based on tax positions related to prior tax years7,448 
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 adjustment19 
Balance June 30, 202113,399 
Additions based on tax positions related to the current tax year448 
Additions based on tax positions related to prior tax years2,958 
Reductions based on tax positions related to prior tax years(23)
Reductions due to audit settlements(2,958)
Reductions due to lapse of statute of limitations(799)
Cumulative translation adjustment(29)
Balance June 30, 202212,996 
Additions based on tax positions related to the current tax year2,167 
Additions based on tax positions related to prior tax years770 
Reductions based on tax positions related to prior tax years(62)
Reductions due to audit settlements— 
Reductions due to lapse of statute of limitations(225)
Cumulative translation adjustment(22)
Balance June 30, 2023$15,624 
    
For the year ended June 30, 2023, the amount of unrecognized tax benefits (exclusive of interest) that, if recognized, would impact the effective tax rate is $8,518. We recognize interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. The interest and penalties recognized as of years ended June 30, 2023, 2022, and 2021 were $1,924, $1,383, and $1,014, respectively. It is reasonably possible that a further change in unrecognized tax benefits in the range of $910 to $960 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 2016 through 2023 remain open for examination by the United States Internal Revenue Service ("IRS") and the years 2015 through 2023 remain open for examination in the various states and non-U.S. 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.