(14)       Income Taxes

 

Income before income taxes for the years ended June 30, 2017, 2016 and 2015, was taxed under the following jurisdictions (in thousands):  





The provision for income taxes is presented below (in thousands):  



The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 35% to pretax income as a result of the following (in thousands):





The components of our deferred tax assets and liabilities at June 30, 2017 and June 30, 2016,  are as follows (in thousands):  





 

We reported the net deferred tax assets and liabilities in our consolidated balance sheets at June 30, 2017 and June 30, 2016, as follows (in thousands):  







As of June 30, 2017,  we had $114.6 million of U.S. federal and state net operating loss carryforwards and $90.4 million of non-U.S. net operating loss carryforwards, which expire in various years beginning in 2018 or carry forward indefinitely. 

 

The valuation allowance at June 30, 2017 relates to a provision for uncertainty of the utilization of net operating loss carryforwards of $12.1 million and capital loss and other items of $3.2 million. We believe that it is more likely than not that the benefits of deferred tax assets, net of any valuation allowance, will be realized.



A substantial portion of our manufacturing operations and administrative functions in Malaysia and Singapore operate under various tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2020.    The end of certain tax holidays may be extended if specific conditions are met. The net impact of these tax holidays and tax incentive programs increased our net earnings by $19.5 million ($0.14 per diluted share) for the year ended June 30, 2017 and $19.2 million ($0.14 per diluted share) for the year ended June 30, 2016.



At June 30, 2017, applicable U.S. federal income taxes and foreign withholding taxes have not been provided on the accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. The total amount of these undistributed earnings at June 30, 2017 amounted to approximately $1.5 billion. If these earnings had not been permanently reinvested, deferred taxes of approximately $358 million would have been recognized in the consolidated financial statements.



In accounting for uncertainty in income taxes, we recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (that is, a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for annual periods. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets. Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits on June 30, 2017, is not material to our results of operations, financial condition or cash flows, and if recognized, would not have a material impact on our effective tax rate.



Our income tax returns are based on calculations and assumptions subject to audit by various tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws.  We regularly assess the potential outcomes of examinations by tax authorities in determining the adequacy of our provision for income taxes.  We are currently under audit by the Australian Taxation Office for the tax years 2009 to 2013. Although we do not believe that any material adjustments will result from this audit, the outcome of tax audits cannot be predicted with certainty. Any final assessment resulting from tax audits may result in material changes to our past or future taxable income, tax payable or deferred tax assets, and may require us to pay penalties and interest that could materially adversely affect our financial results.