Income before income taxes was comprised of the following (in thousands):

 

		Year Ended June 30,
		201 9				201 8				201 7
Domestic		$	64,081			$	81,557			$	81,721
Foreign			47,934				44,395				30,240
Income before income taxes		$	112,015			$	125,952			$	111,961

 

The provision for income taxes consisted of the following (in thousands):

 

		Year Ended June 30,
		201 9				201 8				201 7
Taxes on income consist of:
Currently tax provision:
Federal		$	16,090			$	28,416			$	28,462
State			544				5,315				4,051
Foreign			13,329				11,983				8,212
Total current tax provision			29,963				45,714				40,725
Deferred tax provision:
Federal			(6,903	)			(40,378	)			(901	)
State			(3,977	)			(1,381	)			(968	)
Foreign			(3,142	)			(4,154	)			(2,981	)
Total deferred tax provision			(14,021	)			(45,912	)			(4,850	)
Total income tax provision		$	15,942			$	(198	)		$	35,875

 

 

The Company’s effective income tax rate for fiscal  was vs () in the prior year. The change in the effective tax rate for fiscal and was driven by changes in net discrete tax benefits of million and million for fiscal year and respectively.

 

The Company's discrete tax benefits in fiscal primarily related to share-based compensation excess tax benefits of million,  million related to current year acquisitions, and  million for tax refunds relating to certain state apportionments. The current year was benefited from acquisition payments made to employees and parties, which were deductible for tax purposes. 

 

e.

 

On the Tax Cuts and Jobs Act (the “Tax Act”) was enacted, which reduced the U.S. federal corporate tax rate from to required companies to pay a -time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings. The Tax Act added many new provisions including changes the deduction for executive compensation, a tax on global intangible low taxed income (“GILTI”), the base erosion anti abuse tax (“BEAT”) and a deduction for foreign derived intangible income (“FDII”). The SEC staff issued Staff Accounting Bulletin (“SAB ) later codified as ASU -  which provides a measurement period of up to year from the Tax Act’s enactment date to complete the accounting for the effects of the Tax Act.

 

The end of the measurement period allowed under ASU - was However, the Company anticipates additional interpretations and clarifications to be issued by the U.S. Treasury Department, which affect future period tax calculations. The Company made the accounting policy election to treat taxes due on U.S. inclusions in taxable income related to GILTI as a current period expense when incurred. 

 

The following is a reconciliation of the federal tax calculated at the statutory rate of to the actual income taxes provided (in thousands):

 

		Year Ended June 30,
		201 9				201 8				201 7
Income tax expense at federal statutory rate			21.0	%			28.1	%			35.0	%
State income taxes, net of federal benefit			0.8	%			2.5	%			1.9	%
Qualified production activity deduction			-	%			(2.4	)%			(3.4	)%
Research and development tax credit			(1.6	)%			(1.4	)%			(1.4	)%
Contingent consideration adjustment			(0.4	)%			3.3	%			4.1	%
Foreign tax rate differences			0.2	%			(3.5	)%			(4.6	)%
Option exercises			(5.8	)%			(1.8	)%			-	%
Domestic tax legislation changes			1.7	%			(26.2	)%			-	%
State apportionment changes			(2.3	)%			-				-
Other, net			0.6	%			1.2	%			0.4	%
Effective tax rate			14.2	%			(0.2	)%			32.0	%

  

Deferred taxes on the Consolidated Balance Sheets consisted of the following temporary differences (in thousands):

 

		June 30
		201 9				201 8
Inventory		$	7,743			$	5,873
Net operating loss carryovers			33,294				15,938
Tax credit carryovers			9,640				7,029
Excess tax basis in equity investments			3,433				2,813
Deferred compensation			10,333				7,806
Derivative - cash flow hedge			2,921				-
Other			5,207				3,864
Valuation allowance			(6,974	)			(2,978	)
Deferred tax assets			65,597				40,345
Net unrealized gain on available-for-sale investments			(4,542	)			(8,384	)
Intangible asset amortization			(141,998	)			(111,247	)
Depreciation			(8,371	)			(6,349	)
Other			(440	)			(658	)
Deferred tax liabilities			(155,351	)			(126,638	)
Net deferred tax liabilities		$	(89,754	)		$	(86,293	)

 

A deferred tax valuation allowance is required when it is more likely than that all or a portion of deferred tax assets will be realized. The valuation allowance as of was  million, an increase of million from the prior year. The change was driven by an increase in the valuation allowance for the Company’s net operating loss and credit carryforwards for fiscal acquisitions. 

 

 

 

The Company has recognized a deferred tax liability for unremitted foreign earnings of approximately million from its foreign operations because its subsidiaries have invested or will invest the undistributed earnings indefinitely. The transition tax included as part of the Tax Act resulted in the previously untaxed foreign earnings being included in the federal and state fiscal  taxable income.  The -time transition tax was based on certain foreign earnings for which earnings have been previously indefinitely reinvested as well as the amount of earnings held in cash and other specified assets.    additional income taxes have been provided for cumulative unremitted foreign earnings as at this time our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. If there are policy changes, we would record applicable taxes at that time.

 

We continue to analyze our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxation.  In addition, we anticipate that further guidance from the IRS and US Treasury related to the Tax Act could impact the amount of any related taxes.  Therefore, it is practical to estimate the amount of the deferred income tax liabilities related to investments in these foreign subsidiaries.

 

The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits (in thousands):

 

		Year Ended June 30,
		201 9				201 8				201 7
Beginning balance		$	1,947			$	1,747			$	1,480
Additions due to acquisitions			900								628
Additions for tax positions of current year			2,185				35				13
Closure of tax years											(374	)
Tax reform							165
Ending balances		$	5,032			$	1,947			$	1,747

 

The Company does believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase in the next months. The Company files income tax returns in the U.S federal and certain state tax jurisdictions, and several jurisdictions outside the U.S. The Company's federal returns are subject to tax assessment for  and subsequent years. State and foreign income tax returns are generally subject to examination for a period of to years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to year after formal notification to the states.