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INCOME TAXES | 12 Months Ended
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Jun. 30, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of continuing operations (loss) income before income taxes are as follows:
|  | Fiscal Years
|  | 2019 |  | 2018 |  | 2017
|  | (Dollars in thousands)
(Loss) income before income taxes: |  |  |  |  |  |
U.S. |  | $ | (17,513 | ) |  | $ | (16,604 | ) |  | $ | 2,467 |
International |  | (4,754 | ) |  | 6,413 |  |  | 3,462 |
|  | $ | (22,267 | ) |  | $ | (10,191 | ) |  | $ | 5,929 |
The (benefit) provision for income taxes consists of:
|  | Fiscal Years
|  | 2019 |  | 2018 |  | 2017
|  | (Dollars in thousands)
Current: |  |  |  |  |  |
U.S. |  | $ | (519 | ) |  | $ | 2,151 |  |  | $ | 994 |
International |  | 1,069 |  |  | 1,894 |  |  | 268 |
Deferred: |  |  |  |  |  |
U.S. |  | (2,303 | ) |  | (73,728 | ) |  | 7,901 |
International |  | (392 | ) |  | (129 | ) |  | 61 |
|  | $ | (2,145 | ) |  | $ | (69,812 | ) |  | $ | 9,224 |
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to earnings (loss) before income taxes, as a result of the following:
|  | Fiscal Years
|  | 2019 |  | 2018 |  | 2017
U.S. statutory rate |  | 21.0 | % |  | 28.0 | % |  | 35.0 | %
State income taxes, net of federal income tax benefit |  | 0.5 |  |  | 14.8 |  |  | 8.7 |
Valuation allowance (1) |  | (14.5 | ) |  | 560.8 |  |  | 117.0 |
Foreign income taxes at other than U.S. rates |  | 0.9 |  |  | (0.5 | ) |  | (4.9 | )
Work opportunity tax credits |  | 7.2 |  |  | 15.2 |  |  | (26.8 | )
Deferred tax rate remeasurement |  | — |  |  | 99.0 |  |  | — |
Uncertain tax positions |  | 1.0 |  |  | (15.9 | ) |  | — |
Stock-based compensation |  | 2.2 |  |  | (15.8 | ) |  | 25.2 |
Other, net (2) |  | (8.7 | ) |  | (0.6 | ) |  | 1.4 |
|  | 9.6 | % |  | 685.0 | % |  | 155.6 | %
_______________________________________________________________________________ (1) See Note 1 to the Consolidated Financial Statements.
(2) | The (8.7)% of Other, net in fiscal year 2019 includes the rate impact of goodwill derecognition and miscellaneous items of (5.9)% and (2.8)%, respectively. Miscellaneous items do not include any items in excess of 5% of computed tax. The (0.6)% of Other, net in fiscal year 2018 does not include the rate impact of any items in excess of 5% of computed tax. The other 1.4% of Other, net in fiscal year 2017 includes the rate impact of meals and entertainment expense disallowance, adjustments resulting from charitable contributions, officer life insurance and miscellaneous items of 6.3%, 10.0%, (7.8)% and (7.1)%, respectively. Miscellaneous items do not include any items in excess of 5% of computed tax.
The components of the net deferred tax assets and liabilities are as follows:
|  | June 30,
|  | 2019 |  | 2018
|  | (Dollars in thousands)
Deferred tax assets: |  |  |  |
Deferred rent |  | $ | 3,816 |  |  | $ | 5,251 |
Payroll and payroll related costs |  | 11,696 |  |  | 14,083 |
Net operating loss carryforwards |  | 48,208 |  |  | 41,570 |
Tax credit carryforwards |  | 36,966 |  |  | 35,102 |
Deferred franchise fees |  | 7,508 |  |  | 6,818 |
Financial lease liability |  | 7,387 |  |  | — |
Other |  | 8,709 |  |  | 17,416 |
Subtotal |  | $ | 124,290 |  |  | $ | 120,240 |
Valuation allowance |  | (70,707 | ) |  | (68,610 | )
Total deferred tax assets |  | $ | 53,583 |  |  | $ | 51,630 |
Deferred tax liabilities: |  |  |  |
Goodwill and intangibles |  | $ | (62,378 | ) |  | $ | (72,670 | )
Other |  | (9,129 | ) |  | (6,811 | )
Total deferred tax liabilities |  | $ | (71,507 | ) |  | $ | (79,481 | )
Net deferred tax liability |  | $ | (17,924 | ) |  | $ | (27,851 | )
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). In connection with the Tax Act, the Company recorded a provisional net tax benefit of $68.1 million in continuing operations for the twelve months ended June 30, 2018. During the six months ended December 31, 2018, the Company made no adjustments to this provisional tax benefit and finalized its accounting related to the Tax Act. The net tax benefit is primarily attributable to the impact of the corporate rate reduction on our deferred tax assets and liabilities along with a partial release of the U.S. valuation allowance. The benefit recognized on current losses and the partial valuation allowance release is solely attributable to tax reform and the law change that allows for the indefinite carryforward of net operating losses ("NOLs") arising in tax years ending after December 31, 2017. Prior law limited the carryforward period to 20 years. As a result of the new tax rules, companies can now consider its indefinite lived deferred tax liabilities as a source of income to support the realization of its existing deferred tax assets that upon reversal are expected to generate indefinite lived NOLs. Consequently, the Company was able to remove the valuation allowance associated with these deferred tax assets. The Company continues to maintain a valuation allowance on the historical balance of its finite lived federal NOLs, tax credits and various state tax attributes. Changes in interpretations, assumptions, and guidance regarding the new tax legislation, as well as the potential for technical corrections to the Tax Act, could have a material impact to the Company’s effective tax rate in future periods. At June 30, 2019, the Company has tax effected federal, state, Canada and U.K. net operating loss carryforwards of approximately $31.4, $13.4, $2.8 and $0.6 million, respectively. The Company’s federal loss carryforward consists of $13.1 million that will expire from fiscal years 2034 to 2037 and $18.3 million that has no expiration. The state loss carryforwards will expire from fiscal years 2020 to 2039. The Canada loss carryforward will expire from fiscal years 2036 to 2039. The U.K. loss carryforward has no expiration. The Company's tax credit carryforward of $36.9 million consists of $35.7 million that will expire from fiscal years 2030 to 2039, $0.5 million that will expire from fiscal years 2020 to 2029 and $0.7 million of carryforward that has no expiration date. As of June 30, 2019, the Company has not provided deferred taxes on approximately $4.4 million of undistributed earnings of attributable to its international subsidiaries that have been considered to be reinvested indefinitely. The Company has multiple avenues to repatriate these earnings tax efficiently and therefore it does not expect to incur significant U.S. or foreign income taxes upon repatriation. The Company files tax returns and pays tax primarily in the U.S., Canada, the U.K. and Luxembourg as well as states, cities, and provinces within these jurisdictions. The Company is no longer subject to IRS examinations for years before 2014. With limited exceptions, the Company is no longer subject to state and international income tax examination by tax authorities for years before 2012. A rollforward of the unrecognized tax benefits is as follows:
|  | Fiscal Years
|  | 2019 |  | 2018 |  | 2017
|  | (Dollars in thousands)
Balance at beginning of period |  | $ | 3,027 |  |  | $ | 1,388 |  |  | $ | 1,357 |
Additions based on tax positions related to the current year |  | 287 |  |  | 553 |  |  | 259 |
Additions/(reductions) based on tax positions of prior years |  | (154 | ) |  | 1,608 |  |  | 80 |
Reductions on tax positions related to the expiration of the statute of limitations |  | (397 | ) |  | (177 | ) |  | (179 | )
Settlements |  | — |  |  | (345 | ) |  | (129 | )
Balance at end of period |  | $ | 2,763 |  |  | $ | 3,027 |  |  | $ | 1,388 |
If the Company were to prevail on all unrecognized tax benefits recorded, a net benefit of approximately $2.2 million would be recorded in the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During the fiscal years 2019, 2018 and 2017, we recorded interest and penalties of approximately $0.1 million as additions to the accrual net of the respective reversal of previously accrued interest and penalties. As of June 30, 2019, the Company had accrued interest and penalties related to unrecognized tax benefits of $1.2 million. This amount is not included in the gross unrecognized tax benefits noted above. It is reasonably possible the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next fiscal year. However, an estimate of the amount or range of the change cannot be made at this time.

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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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