Income Taxes
Income tax expense attributable to continuing operations is comprised of the following components: |
| | | | | | | | | | | |
| Years Ended June 30, |
| 2017 | | 2016 | | 2015 |
Current expense: | | | | | |
Federal | $ | 81,964 |
| | $ | 71,632 |
| | $ | 137,455 |
|
State and other | 31,977 |
| | 27,977 |
| | 53,194 |
|
| 113,941 |
| | 99,609 |
| | 190,649 |
|
Deferred expense (benefit): | | | | | |
Federal | (4,120 | ) | | (4,353 | ) | | (16,558 | ) |
State and other | (1,327 | ) | | (14,252 | ) | | 3,708 |
|
| (5,447 | ) | | (18,605 | ) | | (12,850 | ) |
Tax benefit relating to uncertain tax positions | (18 | ) | | (33 | ) | | (894 | ) |
Income tax expense | $ | 108,476 |
| | $ | 80,971 |
| | $ | 176,905 |
|
The income tax expense attributable to continuing operations differs from the amount derived by applying the statutory federal rate to pre-tax income principally due to the effect of the following items: |
| | | | | | | | | | | |
| Years Ended June 30, |
| 2017 | | 2016 | | 2015 |
Federal tax expense at statutory federal rate | $ | 96,578 |
| | $ | 85,495 |
| | $ | 148,867 |
|
State and local income taxes, net of federal benefit | 19,489 |
| | 17,709 |
| | 31,707 |
|
Change in the estimated applicable corporate tax rate used to determine deferred taxes | 85 |
| | (12,717 | ) | | 8,122 |
|
Domestic production activities tax deduction | (7,998 | ) | | (6,329 | ) | | (11,076 | ) |
Tax benefit relating to uncertain tax positions | (18 | ) | | (33 | ) | | (894 | ) |
Tax return to book provision adjustments | (208 | ) | | (3,271 | ) | | (49 | ) |
Nondeductible expenses and other | 548 |
| | 117 |
| | 228 |
|
Income tax expense | $ | 108,476 |
| | $ | 80,971 |
| | $ | 176,905 |
|
The tax effects of temporary differences which give rise to significant portions of the deferred tax assets and liabilities included in the accompanying consolidated balance sheets as of June 30, 2017 and 2016 are as follows:
|
| | | | | | | |
| June 30, |
| 2017 | | 2016 |
Deferred tax asset (liability) | | | |
Investment in MSGN L.P. | $ | (356,064 | ) | | $ | (358,725 | ) |
Compensation and benefit plans | 4,210 |
| | 2,164 |
|
Net noncurrent deferred tax liability | $ | (351,854 | ) | | $ | (356,561 | ) |
Deferred tax assets as of June 30, 2017 have resulted from the Company's future deductible temporary differences. At this time, based on current facts and circumstances, management believes that it is more likely than not that the Company will realize the benefit for its gross deferred tax assets.
The current state tax prepaid asset of $14,322 and $28,384 as of June 30, 2017 and 2016, respectively, and the current federal tax payable of $11,483 and $8,662 as of June 30, 2017 and 2016, respectively, are reflected in the Company's income tax prepaid and payables balances in the accompanying consolidated balance sheets.
The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits associated with the Company's uncertain tax positions: |
| | | |
Balance as of June 30, 2016 | $ | 32 |
|
Additions for tax positions related to prior years | — |
|
Decreases for tax positions related to prior years | (18 | ) |
Balance as of June 30, 2017 | $ | 14 |
|
During the year ended June 30, 2017, the Company recorded a $18 tax benefit related to uncertain tax positions (including interest and penalties) due to the expiration of the applicable statute of limitations. The expense related to uncertain tax positions taken in prior years was comprised of income taxes associated with a state filing position. The Company recognizes accrued interest and penalties on unrecognized tax positions as a component of income tax expense. The Company expects its uncertain tax position balance of $14 to be released to income within the next twelve months which will have a negligible impact on the Company's effective tax rate.
The Company made cash income tax payments (net) of $97,164, $192,315 and $217,316 for years ended June 30, 2017, 2016 and 2015, respectively. The cash income tax payments for the year ended June 30, 2016 include approximately $120,000 which is reflected in net cash used in operating activities of discontinued operations in the accompanying consolidated statement of cash flows. The income tax payments classified in net cash used in operating activities of discontinued operations primarily reflect a one-time payment related to certain historical activities of our former subsidiary, MSG, and other offsetting items. Income taxes paid by the Company during the year ended June 30, 2015 include amounts related to the sale of Fuse.
During the third quarter of fiscal year 2017, the Internal Revenue Service concluded its fieldwork on the audit of the Company’s federal income tax returns as filed for the tax year ended December 31, 2013. The Company does not expect the audit to result in material changes to the tax returns as filed.
The Company was notified during the third quarter of fiscal year 2017 that the City of New York was commencing an examination of the Company's New York City income tax returns as filed for the tax years ended December 31, 2013 and 2014. The Company does not expect the examination, when finalized, to result in material changes to the tax returns as filed.
In addition, during the fourth quarter of fiscal year 2017 the Company was notified that the City of New York was also initiating a review of the Company’s 2014 and 2015 Unincorporated Business Tax Returns. The Company does not expect the examination, when finalized, to result in material changes to the tax returns as filed.
The Company was notified during the fourth quarter of fiscal year 2017 that the State of New York was commencing an examination of the Company's New York State income tax returns as filed for the tax years ended December 31, 2013 and 2014. The Company does not expect the examination, when finalized, to result in material changes to the tax returns as filed.
The federal and state statute of limitations are currently open on the Company's 2013, 2014, 2015, and 2016 tax returns.