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Income Taxes
 12 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Malibu Boats, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. The LLC continues to operate in the United States as a partnership for U.S. federal income tax purposes. Maverick Boat Group is separately subject to U.S. federal and state income tax with respect to its net taxable income.
Income taxes are computed in accordance with ASC Topic 740, Income Taxes, and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act contains significant business tax provisions, including modifications to the rules limiting the deductibility of net operating losses (NOLs), expensing of qualified improvement property (QIP) and business interest in Internal Revenue Code Sections 172(a) and 163(j), respectively. The effects of the new legislation are recognized upon enactment. The Company did not recognize any significant impact to income tax expense for fiscal year 2020 relating to the CARES Act.
The components of provision for income taxes are as follows:
Fiscal Year Ended June 30,
202120202019
Current tax expense:
     Federal$21,737 $8,062 $11,240 
     State4,014 1,979 3,368 
     Foreign1,284 378 725 
          Total current27,035 10,419 15,333 
Deferred tax expense:
     Federal6,147 7,849 5,336 
     State899 917 1,609 
     Foreign(102)(109)(182)
          Total deferred6,944 8,657 6,763 
Income tax expense$33,979 $19,076 $22,096 
The income tax expense 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,
202120202019
Federal tax provision at statutory rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit2.9 2.9 4.4 
Permanent differences attributable to partnership investment(0.3)(0.2)(0.8)
Non-controlling interest(0.7)(0.9)(0.9)
Other, net— — 0.4 
Total income tax expense on continuing operations22.9 %22.8 %24.1 %
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, 2021 and 2020 are as follows:
As of June 30,
20212020
Deferred tax assets:
Partnership basis differences$56,323 $61,650 
Accrued liabilities and reserves876 496 
State tax credits and NOLs6,004 5,004 
Foreign tax credits580 580 
Other345 275 
     Less valuation allowance(15,279)(14,582)
     Total deferred tax assets48,849 53,423 
Deferred tax liabilities:
Fixed assets and intangibles28,644 467 
Other52 35 
     Total deferred tax liabilities28,696 502 
     Total net deferred tax assets$20,153 $52,921 
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, 2021 and 2020, the Company concluded that $15,279 and $14,582, respectively, of valuation allowance against deferred tax assets was necessary. The Company continues to record the valuation allowance against the deferred tax asset generated by the state impact of the 743(b) amortization and on state net operating losses generated by current and future amortization deductions (with respect to the Section 754 election) that are reported in the Tennessee corporate tax return without offsetting income, which is taxable at the LLC. These net operating losses have a 15 year carryover and will expire, if unused, between 2030 and 2036. This also includes a valuation allowance in the amount of $580 related to foreign tax credit carryforward that is not expected to be utilized in the future.
Unrecognized tax benefits are discussed in the Company's accounting policy for income taxes (Refer to Note 1 on Income Taxes for more information). The Company has filed federal and state income tax returns that remain open to examination for fiscal years 2018 through 2020, while its subsidiaries, Malibu Boats Holdings, LLC and Malibu Boats Pty Ltd., remain open to examination for fiscal years 2017 through 2020. The Company closed the IRS examination of its June 30, 2015 return during the fourth quarter of fiscal year 2019, resulting in an immaterial adjustment to its tax liability.
A reconciliation of changes in the amount of unrecognized tax benefits for the fiscal years ended June 30, 2021, 2020, 2019 is as follows:
Fiscal Year Ended June 30,
202120202019
Balance as of July 1$1,445 $1,401 $329 
Additions based on tax positions taken during the current period304 314 1,216 
Reductions for settlements with taxing authorities(250)(93)(144)
Reductions due to statute settlements(50)(64)— 
Additions (reductions) for tax positions of prior years3 (113)— 
Balance as of June 30$1,452 $1,445 $1,401 
In fiscal year 2021, the Company settled $250 related to its state tax filing positions. Also in fiscal year 2021, the Company reduced its uncertain tax positions $50 as a result of statute settlements, and recorded $304 in connection with its current year state filing positions. As of June 30, 2021, it is reasonably possible that $286 of the total unrecognized tax benefits recorded will reverse within the next twelve months. Of the total unrecognized tax benefits recorded on the consolidated balance sheet, $1,225 would impact the effective tax rate once settled.
As discussed in Note 1 to the Consolidated Financial Statements, our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. At June 30, 2021, we had $235 of accrued interest related to unrecognized tax benefits.
The Company did not provide for U.S. federal, state income taxes or foreign withholding taxes in fiscal year 2021 on the outside basis difference of its non-U.S. subsidiary, as such foreign earnings are considered to be permanently reinvested. The estimated income and withholding tax liability associated with the remittance of these earnings is nominal.