v3.26.1
Income Taxes
 12 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
Note 15 – Income Taxes
The domestic and foreign components of income before provision for income taxes are as follows (in thousands):
Year ended June 30,
202620252024
Domestic$624,392 $534,394 $480,145 
Foreign79,969 70,947 64,504 
Income before income taxes$704,361 $605,341 $544,649 
The components of income tax expense are as follows (in thousands):
Year ended June 30,
202620252024
Current:
Federal$(20,746)$82,647 $130,621 
State and local22,108 32,174 26,268 
Foreign21,804 17,750 17,599 
Total current23,166 132,571 174,488 
Deferred:
Federal131,167 (18,829)(42,322)
State and local15,218 (6,167)(6,827)
Foreign(998)(2,064)(614)
Total deferred145,387 (27,060)(49,763)
Total income tax expense$168,553 $105,511 $124,725 
Income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0%, presented after prospectively adopting ASU 2023-09, as a result of the following (dollars in thousands):
Year ended June 30, 2026
U.S. Federal statutory tax rate$147,916 21.0 %
State and local taxes, net of federal benefit (1)
28,669 4.1 
Foreign tax effects2,121 0.3 
Effect of cross-border tax laws(1,449)(0.2)
Tax credits:
Research and development (R&D) credits(10,744)(1.6)
Other tax credits(1,302)(0.2)
Changes in valuation allowances3,157 0.4 
Nontaxable or nondeductible items5,341 0.8 
Changes in unrecognized tax benefits(5,156)(0.7)
Total tax expense$168,553 23.9 %
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(1)    State taxes in Virginia and California make up the majority (greater than 50 percent) of the tax effect in this category.
Income tax expense differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21.0%, prior to the adoption of ASU 2023-09, as a result of the following (dollars in thousands):
Year ended June 30,
20252024
Expected tax expense computed at federal statutory rate$127,122 $114,376 
State and local taxes, net of federal benefit20,362 16,508 
R&D tax credit, net(14,073)(12,604)
Stock-based compensation(6,221)(2,385)
Nonincludible and nondeductible items, net3,426 4,368 
Remeasurement of deferred taxes— (1,150)
Changes in unrecognized tax benefits(23,161)— 
Other(1,944)5,612 
Total income tax expense$105,511 $124,725 
Effective income tax rate17.4 %22.9 %
The effective tax rates for fiscal 2026, 2025, and 2024 were primarily driven by state income taxes offset by R&D tax credits. Additionally, the effective tax rate for fiscal 2025 benefited from a reduction in unrecognized tax benefits following resolution of a federal income tax audit.
A reconciliation of income taxes paid, net of refunds received, is as follows (in thousands):
Year ended June 30, 2026
Federal:$35,153 
State and Local:
Virginia15,100 
California6,000 
All other15,005 
Foreign:
UK11,008 
Germany8,619 
All other2,284 
Total income taxes paid, net of refunds received$93,169 
The Company paid income taxes, net of refunds received, of $134.8 million and $182.8 million for the years ended June 30, 2025 and June 30, 2024, respectively.
The tax effects of temporary differences that give rise to deferred taxes are presented below (in thousands):
June 30,
20262025
Deferred tax assets:
Operating lease liabilities$127,551 $110,068 
Reserves and accruals19,243 18,782 
Capitalized R&D124,877 211,035 
Credits and net operating loss carryovers14,521 11,191 
Deferred compensation and post-retirement obligations36,592 34,650 
Stock-based compensation15,761 13,076 
Valuation allowance(7,938)(4,781)
Total deferred tax assets330,607 394,021 
Deferred tax liabilities:
Goodwill and other intangible assets(513,983)(384,600)
Property, plant, and equipment(21,039)(26,091)
Operating lease right-of-use assets(94,476)(82,747)
Deferred revenue(54,930)(21,967)
Prepaid expenses(12,827)(11,209)
Interest rate swaps(2,117)(2,063)
Other(5,004)(7,062)
Total deferred tax liabilities(704,376)(535,739)
Net deferred tax liability$(373,769)$(141,718)
The federal net operating loss carryovers have indefinite carryforward periods.
On July 4, 2025, the President signed into law the One Big Beautiful Bill Act (OBBBA). The OBBBA, among other things, enacted a provision that allows immediate deduction of domestic R&D costs in the year incurred and accelerates recovery of previously capitalized R&D costs.
The Company is subject to income taxes in the U.S. and various state and foreign jurisdictions. Tax statutes and regulations within each jurisdiction are subject to interpretation and require the application of significant judgment. The Company is currently under examination for fiscal 2019-2020 in one state jurisdiction and fiscal 2022-2023 in another state. The Company does not expect the resolution of either state examination to have a material impact on its consolidated financial statements.
Changes in the Company’s liability for unrecognized tax benefits are shown in the table below (in thousands):
Year ended June 30,
202620252024
Beginning of year$30,163 $73,044 $153,860 
Additions based on prior year tax positions1,080 — 3,592 
Additions based on current year tax positions5,474 6,974 11,703 
Reductions based on prior year tax positions(440)(15,183)(96,111)
Settlement with taxing authorities(1,440)(34,150)— 
Lapse of statute of limitations(5,709)(522)— 
End of year$29,128 $30,163 $73,044 
Unrecognized tax benefits that, if recognized, would affect the effective tax rate$29,128 $30,163 $73,044 
During fiscal 2025, the Company reduced its unrecognized tax benefits following resolution of the federal income tax audit. During fiscal 2024, the Company reduced its unrecognized tax benefit, primarily due to completing a detailed analysis of capitalized R&D costs which considered recent guidance issued by the IRS.
At June 30, 2026, the amount of accrued interest and penalties on our consolidated balance sheet was $2.3 million. The Company recognizes net interest and penalties as a component of income tax expense. Over the next 12 months, the Company does not expect a significant increase or decrease in the unrecognized tax benefits recorded at June 30, 2026. As of June 30, 2026, the entire balance of unrecognized tax benefits is included in deferred taxes and other liabilities.
The Organisation for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2). While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The Company does not expect Pillar 2 to have a material impact on its effective tax rate or its results of operation, financial position, and cash flows.