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INCOME TAXES | 12 Months Ended
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Jun. 30, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income from continuing operations before income taxes in fiscal 2024, 2023 and 2022 is presented below:
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
United States | $ | (591.1) |  |  | $ | (253.6) |  |  | $ | (277.5) |
Foreign | 795.6 |  |  | 958.4 |  |  | 704.3 |
Total | $ | 204.5 |  |  | $ | 704.8 |  |  | $ | 426.8 |
The components of the Company’s total provision (benefit) for income taxes from continuing operations during fiscal 2024, 2023 and 2022 are presented below:
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
Provision for income taxes on continuing operations: |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | 1.2 |  |  | $ | 2.6 |  |  | $ | 6.6 |
State and local | (3.5) |  |  | 2.6 |  |  | (6.0) |
Foreign | 107.2 |  |  | 120.1 |  |  | 152.1 |
Total | 104.9 |  |  | 125.3 |  |  | 152.7 |
Deferred: |  |  |  |  |
Federal | (36.7) |  |  | (61.1) |  |  | (2.7) |
State and local | (16.7) |  |  | 1.0 |  |  | (12.8) |
Foreign | 43.6 |  |  | 116.4 |  |  | 27.6 |
Total | (9.8) |  |  | 56.3 |  |  | 12.1 |
Provision for income taxes on continuing operations | $ | 95.1 |  |  | $ | 181.6 |  |  | $ | 164.8 |
The reconciliation of the U.S. Federal statutory tax rate to the Company’s effective income tax rate during fiscal 2024, 2023 and 2022 is presented below:
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
Income (loss) from continuing operations before income taxes | $ | 204.5 |  |  | $ | 704.8 |  |  | $ | 426.8 |
Provision for income taxes at statutory rate | $ | 42.9 |  |  | $ | 148.0 |  |  | $ | 89.6 |
State and local taxes—net of federal benefit | (15.9) |  |  | 2.8 |  |  | (14.9) |
Foreign tax differentials | 20.9 |  |  | (10.1) |  |  | (16.4) |
Change in valuation allowances | 38.9 |  |  | 10.2 |  |  | (2.3) |
Change in unrecognized tax benefit | (15.5) |  |  | 32.5 |  |  | (10.6) |
Permanent differences—net | 7.6 |  |  | (4.9) |  |  | 25.4 |
Non-deductible executive stock compensation | 19.7 |  |  | 27.7 |  |  | 37.1 |
Currency Loss | (22.5) |  |  | (13.6) |  |  | (0.2) |
Dispositions of business assets | — |  |  | — |  |  | 12.7 |
Russia exit | — |  |  | (7.0) |  |  | 24.1 |
Principal relocation revaluation | 27.6 |  |  | — |  |  | — |
Nondeductible Interest Expense | 12.1 |  |  | — |  |  | — |
Swiss Tax Credits-net of valuation allowance | (37.8) |  |  | — |  |  | — |
Tax Rate Change Deferred Tax Liability Revaluation | 24.2 |  |  | — |  |  | — |
Other | (7.1) |  |  | (4.0) |  |  | 20.3 |
Provision for income taxes on continuing operations | $ | 95.1 |  |  | $ | 181.6 |  |  | $ | 164.8 |
Effective income tax rate | 46.5 | % |  | 25.8 | % |  | 38.6 | %
The 20.7% increase in the effective tax rate in fiscal 2024 from fiscal 2023 was primarily driven by the following items: •a 17.6% increase from an increase in valuation allowances recorded on interest expense carryforwards; •a 13.5% increase due to changes to the net deferred taxes recognized on the assignment of strategic service functions from Amsterdam to Geneva, as an indirect result of the required revaluation of the original transfer of the main principal location from Geneva to Amsterdam in fiscal 2021; •a 11.8% from the revaluation of the Company’s deferred tax liabilities due to a tax rate increase enacted in Switzerland; and •a 11.7% increase in the foreign tax rate differential impact primarily due to lower fair value gains related to the investment in the Wella business taxed at a lower rate as compared to our U.S. Federal statutory rate of 21%. These increases were partially offset by the following decreases: •a 18.5% decrease as a result of the issuance of non-refundable income tax credits received from the Swiss Tax Authorities of $97.1. The Company recorded a benefit for the tax credit of $37.8, net of a valuation allowance; and •a 12.2% decrease from a reduction of foreign tax audits due to the settlement of foreign tax audits. The 12.8% decrease in the effective tax rate in fiscal 2023 from fiscal 2022 was primarily driven by the following items: •a 6.6% decrease in tax costs associated with the Company’s exit from Russia in the prior year; •a 6.6% decrease from a reduction in permanent differences related to non-deductible expenses and non-deductible foreign exchange losses; •a 4.8% decrease as a result of the reduction in the amount of non-deductible executive stock compensation; •a 3.0% decrease from a gain on the disposition of business assets (real estate) in the prior period; •a 1.9% decrease from a foreign exchange loss recognized on the repatriation of funds in the current year that were previously taxed. These decreases were partially offset by the following increases: •a 7.1% increase in unrecognized tax benefits due to the impact of increasing U.S. taxation of foreign sourced income; and •a 2.4% increase in foreign tax rate differential impact primarily due to lower fair value gains related to the investment in the Wella business taxed at a lower rate as compared to our U.S. Federal statutory rate of 21%. The Company has significant income in jurisdictions such as Germany, Netherlands, France, and Spain which have statutory tax rates higher than the U.S. Federal statutory rate of 21%. The impact of the foreign earnings in higher taxed jurisdictions coupled with U.S. losses at the statutory tax rate of 21% increases the Company’s effective tax rate. This jurisdictional mix is expected to have a continuing impact on the effective tax rate. Significant components of deferred income tax assets and liabilities as of June 30, 2024 and 2023 are presented below:
| June 30, 2024 |  | June 30, 2023
Deferred income tax assets: |  |  |
Inventories | $ | 7.0 |  |  | $ | 7.5 |
Accruals and allowances | 62.1 |  |  | 54.9 |
Sales returns | 15.2 |  |  | 19.1 |
Share-based compensation | 5.3 |  |  | 4.8 |
Employee benefits | 55.7 |  |  | 55.6 |
Net operating loss carry forwards and tax credits | 308.6 |  |  | 241.4 |
Capital loss carry forwards | 0.2 |  |  | 0.3 |
Interest expense limitation carry forward | 102.8 |  |  | 47.5 |
Lease liability | 26.0 |  |  | 28.6 |
Principal relocation lease | 337.7 |  |  | 424.0 |
Property, plant and equipment | 21.1 |  |  | 13.0 |
Other | 58.5 |  |  | 48.4 |
Less: valuation allowances | (151.4) |  |  | (60.7) |
Net deferred income tax assets | 848.8 |  |  | 884.4 |
Deferred income tax liabilities: |  |  |
Intangible assets | 772.4 |  |  | 817.4 |
Licensing rights | 30.2 |  |  | 27.8 |
Right of use asset | 26.3 |  |  | 28.6 |
Investment in partnerships | 61.1 |  |  | 55.2 |
Other | 17.9 |  |  | 25.3 |
Deferred income tax liabilities | 907.9 |  |  | 954.3 |
Net deferred income tax (liability) asset | $ | (59.1) |  |  | $ | (69.9) |
The expirations of tax loss carry forwards, amounting to $482.7 as of June 30, 2024, in each of the fiscal years ending June 30, are presented below:
Fiscal Year Ending June 30, | United States |  | Western Europe |  | Rest of World |  | Total
2025 | $ | — |  |  | $ | 0.1 |  |  | $ | 3.4 |  |  | $ | 3.5 |
2026 | — |  |  | — |  |  | 8.1 |  |  | 8.1 |
2027 | — |  |  | 12.9 |  |  | 20.2 |  |  | 33.1 |
2028 | — |  |  | 115.9 |  |  | 16.6 |  |  | 132.5 |
2029 and thereafter | — |  |  | 57.1 |  |  | 248.4 |  |  | 305.5 |
Total | $ | — |  |  | $ | 186.0 |  |  | $ | 296.7 |  |  | $ | 482.7 |
The total valuation allowances recorded are $151.4 and $60.7 as of June 30, 2024 and 2023, respectively. In fiscal 2024, the change in the valuation allowance was primarily due to The Company recording a valuation allowance on its U.S. interest expense limitation carryforwards and a valuation allowance on a portion of the Swiss tax credits granted in the current period. A reconciliation of the beginning and ending amount of UTBs is presented below:
| Year Ended June 30,
| 2024 |  | 2023 |  | 2022
UTBs—July 1 | $ | 235.5 |  |  | $ | 251.6 |  |  | $ | 279.9 |
Additions based on tax positions related to the current year | 1.3 |  |  | 6.7 |  |  | 1.7 |
Additions for tax positions of prior years | 15.8 |  |  | 0.7 |  |  | 20.8 |
Reductions for tax positions of prior years | (19.0) |  |  | (1.4) |  |  | (29.4) |
Settlements | (1.2) |  |  | (4.6) |  |  | (0.2) |
Lapses in statutes of limitations | (17.8) |  |  | (13.8) |  |  | (14.1) |
Foreign currency translation | 0.7 |  |  | (3.7) |  |  | (7.1) |
UTBs—June 30 | $ | 215.3 |  |  | $ | 235.5 |  |  | $ | 251.6 |
As of June 30, 2024, the Company had $215.3 of UTBs of which $169.9 represents the amount that, if recognized, would impact the effective income tax rate in future periods. As of June 30, 2024 and 2023, the liability associated with UTBs, including accrued interest and penalties, is $200.2 and $218.6, respectively, which is recorded in Income and other taxes payable and Other non-current liabilities in the Consolidated Balance Sheets. The Company accrued interest of $(2.4), $7.8 and $4.2, respectively, in fiscal 2024, 2023 and 2022. The Company accrued immaterial penalties in fiscal 2024 and no penalties in fiscal 2023, and released penalties of nil in fiscal 2022. The total gross accrued interest and penalties recorded in the Other noncurrent liabilities in the Consolidated Balance Sheets related to UTBs as of June 30, 2024 and 2023 is $30.2 and $33.1, respectively. The Company is present in approximately 40 tax jurisdictions, and at any point in time is subject to several audits at various stages of completion. As a result, the Company evaluates tax positions and establishes liabilities for UTBs that may be challenged by local authorities and may not be fully sustained, despite a belief that the underlying tax positions are fully supportable. UTBs are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the provision for income taxes as appropriate. In fiscal 2024 and 2023, the Company recognized a tax benefit of $19.0 and $18.4 respectively associated with the settlement of tax audits in multiple jurisdictions and the expiration of foreign and state statutes of limitation. The Company has open tax years ranging from 2009 and forward. On the basis of information available at June 30, 2024, it is reasonably possible that a decrease of up to $32.9 in UTBs related to U.S. and foreign exposures may be necessary within the coming year. It is also possible the ongoing audits by tax authorities may result in increases or decreases to the balance of UTBs. Since it is common practice to extend audits beyond the Statute of Limitations, the Company is unable to predict the timing or conclusion of these audits and, accordingly, the Company is unable to estimate the amount of changes to the balance of UTBs that are reasonably possible at this time. However, the Company believes it has adequately provided for its UTBs for all open tax years in each tax jurisdiction.

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