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Income Taxes and Tax Receivable Agreeement | 12 Months Ended
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Jun. 30, 2015
Income Tax Disclosure [Abstract] |
Income Taxes and Tax Receivable Agreement | Income Taxes and Tax Receivable Agreement In accordance with ASC Topic 740, "Income Taxes", income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax liabilities and assets, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change. Malibu Boats, Inc. is taxed as a C Corporation, which is subject to both federal and state taxation at a corporate level. Therefore, tax expense and deferred tax assets and liabilities reflect such status. The components of provision for (benefit from) income taxes are as follows:
| Fiscal Year Ended June 30, 2015 |  | Fiscal Year Ended June 30, 2014
Current tax expense: |  |  |
Federal | $ | 205 |  |  | $ | 44 |
State | 95 |  |  | 376 |
Foreign | 430 |  |  | 14 |
Total Current | 730 |  |  | 434 |
Deferred tax expense (benefit): |  |  |
Federal | 8,208 |  |  | (2,066 | )
State | (49 | ) |  | (588 | )
Foreign | (226 | ) |  | — |
Total Deferred | 7,933 |  |  | (2,654 | )
Income tax expense (benefit) | $ | 8,663 |  |  | $ | (2,220 | )
The income tax benefit differs from the amount computed by applying the federal statutory income tax rate to income from continuing operations before income taxes. The sources and tax effects of the differences are as follows:
| Fiscal Year Ended June 30, 2015 |  | Fiscal Year Ended June 30, 2014
Federal tax provision at statutory rate | 35.0 | % |  | 35.0 | %
State income taxes, net of federal benefit | 0.1 |  |  | 5.5 |
Permanent differences attributable to partnership investment | 1.6 |  |  | (9.9 | )
Non-controlling interest | (9.8 | ) |  | 36.5 |
Other, net | 0.3 |  |  | (1.9 | )
Total income tax expense on continuing operations | 27.2 | % |  | 65.2 | %
The Company’s effective tax rate includes a rate benefit attributable to the fact that the Company’s subsidiary operated as a limited liability company which was not subject to federal income tax. Accordingly, the portion of the Company’s subsidiary earnings attributable to the non-controlling interest are subject to tax when reported as a component of the non-controlling interests’ taxable income. The components of the Company's net deferred income tax assets and liabilities at June 30, 2015 and 2014 are as follows:
| As of June 30, 2015 |  | As of June 30, 2014
Deferred tax assets: |  |  |
Litigation accrual | $ | — |  |  | $ | 500 |
Partnership basis differences | 105,632 |  |  | 21,452 |
Fixed assets and intangibles | 144 |  |  | — |
Accrued liabilities and reserves | 448 |  |  | — |
State tax credits and NOLs | 388 |  |  | — |
Other | 35 |  |  | — |
Total deferred tax assets | 106,647 |  |  | 21,952 |
Deferred tax liabilities: |  |  |
Income tax deferral due to fiscal year end | — |  |  | 995 |
Fixed assets and intangibles | 1,101 |  |  | — |
Total deferred tax liabilities | 1,101 |  |  | 995 |
Less valuation allowance | — |  |  | — |
Total net deferred tax assets | $ | 105,546 |  |  | $ | 20,957 |
The Company recorded $1,479 of net deferred tax liabilities in connection with the acquisition of Malibu Boats Pty Ltd. This net deferred tax liability represents the tax effects of fair value adjustments that were recorded with no corresponding adjustment to the tax basis of underlying assets and liabilities as the transaction was non-taxable. On an annual basis, the Company performs a comprehensive analysis of all forms of positive and negative evidence to determine whether realizability of deferred tax assets is more likely than not. During each interim period, the Company updates its annual analysis for significant changes in the positive and negative evidence. At June 30, 2015, the Company concluded that no valuation allowance against deferred tax assets was necessary. Unrecognized tax benefits are discussed in the Company's accounting policy for income taxes (refer to Note 1, Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Income Taxes). During the tax year ended June 30, 2015, a liability was established for unrecognized tax benefits through acquisition accounting. As of June 30, 2015, a nominal amount of interest and no penalties had been accrued. Tax years 2011 through 2014 for the Company's subsidiaries, Malibu Boats Holdings, LLC and Malibu Boats Pty Ltd., remain open to examination in certain tax jurisdictions. The Company has filed initial returns that reflect no taxable income in applicable jurisdictions for the period ending June 30, 2014, which remains open to examination. A reconciliation of changes in the amount of unrecognized tax benefits for the fiscal years ended June 30, 2014 and 2015 is as follows:
| As of June 30, 2015 |  | As of June 30, 2014
Balance as of July 1 | $ | — |  |  | $ | — |
Additions based on tax positions taken during the current period | 4 |  |  | — |
Reductions based on tax positions taken during a prior period | — |  |  | — |
Additions based on tax positions taken during a prior period | 62 |  |  | — |
Balance as of June 30 | $ | 66 |  |  | $ | — |
The Company recorded $62 and $4 in connection with uncertain tax positions taken by Malibu Boats Pty Ltd. in prior years and the current year, respectively, that would be payable by the Company if settled with the relevant tax authority. As of June 30, 2015, it is reasonably possible that none of the total unrecognized tax benefits recorded will reverse within the next 12 months. Of the total unrecognized tax benefits recorded on the balance sheet, $66 would impact the effective tax rate once settled. The Company has unremitted earnings with respect to its non-U.S. subsidiary of approximately $295 that would be taxable as dividends if repatriated to the U.S. The estimated income and withholding tax liability associated with the remittance of these earnings is nominal. As such, the Company has not recorded a deferred tax liability associated with these unremitted earnings. Tax Receivable Agreement As discussed in Note 2, the Company entered into the Tax Receivable Agreement with the pre-IPO owners of the LLC that provides for the payment by the Company to the pre-IPO owners (or their permitted assignees) of 85% of the amount of the benefits, if any, that the Company is deemed to realize as a result of (i) increases in tax basis and (ii) certain other tax benefits related to the Company entering into the Tax Receivable Agreement, including those attributable to payments under the Tax Receivable Agreement. In connection with completion of its offerings on July 15, 2014 and May 27, 2015 and the “modified Dutch auction” tender offer on April 15, 2015, the Company recorded deferred tax assets of $92,625 associated with basis differences in assets upon acquiring the additional interest in Malibu Boats Holdings, LLC and in anticipation of making an election under Section 754 of the Internal Revenue Code of 1986, as amended. The Company also recorded a tax receivable agreement liability of $82,834 representing 85% of the tax savings that the Company expects to realize in connection with the Section 754 election. As of June 30, 2015, the Company had recorded deferred tax assets of $110,928 associated with basis differences in assets upon acquiring an interest in Malibu Boats Holdings, LLC. The aggregate tax receivable agreement liabilities were $96,470 representing 85% of the tax savings that the Company will receive in connection with the anticipated Section 754 election. The Company estimates that $2,969 will be currently due under the Tax Receivable Agreement within the next 12 months. In accordance with the Tax Receivable Agreement, the first payment is anticipated to occur 45 days after filing the federal tax return due on March 15, 2016. The following table reflects the changes to the Company's Tax Receivable Agreement liability:
| As of June 30, 2015 |  | As of June 30, 2014
Beginning balance as of June 30, | $ | 13,636 |  |  | $ | — |
Additions to tax receivable agreement: |  |  |
IPO transaction on February 5, 2014 | — |  |  | 13,636 |
Follow-on Offering on July 15, 2014 | 34,028 |  |  | — |
Tender Offer on April 15, 2015 | 23,969 |  |  | — |
Secondary Offering on May 27, 2015 | 24,837 |  |  | — |
Payment under tax receivable agreement | — |  |  | — |
| 96,470 |  |  | 13,636 |
Less current portion under tax receivable agreement | (2,969 | ) |  | — |
Ending balance as of June 30, | $ | 93,501 |  |  | $ | 13,636 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 + Details
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