Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

v3.25.2
INCOME TAXES
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income before income taxes were as follows:
  Year Ended June 30,
(In thousands) 2025 2024 2023
Domestic income before income taxes $ 3,070,097  $ 1,997,090  $ 2,017,338 
Foreign income before income taxes 1,574,351  1,192,942  1,771,852 
Total income before income taxes $ 4,644,448  $ 3,190,032  $ 3,789,190 
The provision for income taxes was comprised of the following:
(In thousands) Year Ended June 30,
2025 2024 2023
Current:
Federal $ 624,002  $ 395,876  $ 553,197 
State 21,161  10,737  14,804 
Foreign 182,448  160,401  188,991 
827,611  567,014  756,992 
Deferred:
Federal (222,907) (110,686) (228,414)
State (5,433) (2,770) (4,295)
Foreign (16,466) (25,422) (122,444)
(244,806) (138,878) (355,153)
Provision for income taxes $ 582,805  $ 428,136  $ 401,839 
The significant components of deferred income tax assets and liabilities were as follows:
(In thousands) As of June 30,
2025 2024
Deferred tax assets:
Capitalized R&D expenses $ 447,043  $ 328,061 
Tax credits and net operating losses 327,618  311,026 
Depreciation and amortization 190,256  151,371 
Inventory reserves 135,121  121,238 
Employee benefits accrual 106,746  95,461 
Non-deductible reserves 69,790  53,668 
Unearned revenue 48,372  25,532 
SBC 18,835  15,375 
Other 43,843  12,785 
Gross deferred tax assets 1,387,624  1,114,517 
Valuation allowance (310,599) (289,534)
Net deferred tax assets $ 1,077,025  $ 824,983 
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries not indefinitely reinvested $ (360,544) $ (315,231)
Deferred profit (41,378) (70,204)
Unrealized gain on investments (16,278) (10,949)
Total deferred tax liabilities (418,200) (396,384)
Total net deferred tax assets $ 658,825  $ 428,599 
Our deferred tax assets for the years ended June 30, 2025 and 2024 reflect the impact of the mandatory capitalization of research and experimental expenditures as required by the 2017 Tax Cuts and Jobs Act. This provision was first effective for us in the year ending June 30, 2023.
As of June 30, 2025, we had U.S. federal, state and foreign net operating loss (“NOL”) carry-forwards of $3.7 million, $10.0 million and $174.5 million, respectively. We also had foreign capital loss carry-forwards of $1.3 million as of June 30, 2025. The U.S. federal NOL carry-forwards will expire at various dates beginning in 2026 through 2036. The utilization of NOLs created by acquired companies is subject to annual limitations under Section 382 of the Internal Revenue Code. However, it is not expected that such annual limitation will significantly impair the realization of these NOLs. The state NOLs will expire at various dates beginning in 2028 through 2036. Foreign NOLs and capital loss carry-forwards will be carried forward indefinitely. State credits of $395.2 million will also be carried forward indefinitely.
The net deferred tax asset valuation allowance was $310.6 million and $289.5 million as of June 30, 2025 and 2024, respectively. The change was primarily due to an increase in the valuation allowance related to state credit carry-forwards generated in the fiscal year ended June 30, 2025. The valuation allowance is based on our assessment that it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. Of the valuation allowance as of June 30, 2025, $308.5 million was related to federal and state credit carry-forwards. The remainder of the valuation allowance was related to state and foreign NOL carry-forwards.
 As of June 30, 2025, we intend to indefinitely reinvest $185.9 million of cumulative undistributed earnings held by certain non-U.S. subsidiaries. If these undistributed earnings were repatriated to the U.S., the potential deferred tax liability associated with the undistributed earnings would be approximately $39 million.
We benefit from tax holidays in Singapore where we manufacture certain of our products. These tax holidays are on approved investments. The tax holidays in Singapore are scheduled to expire in four to seven years. We were in compliance with all the terms and conditions of the tax holidays as of June 30, 2025. The net impact of these tax holidays was to decrease our tax expense by $198.6 million, $159.4 million and $161.5 million in the fiscal years ended June 30, 2025, 2024 and 2023, respectively. The benefits of the tax holidays on diluted net income per share were $1.49, $1.19 and $1.18 for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate was as follows:
  Year Ended June 30,
  2025 2024 2023
Federal statutory rate 21.0  % 21.0  % 21.0  %
GILTI 2.9  % 3.7  % 3.4  %
Goodwill impairment 1.1  % 1.7  % —  %
Net change in tax reserves 0.3  % 1.1  % —  %
State income taxes, net of federal benefit 0.3  % 0.3  % 0.2  %
Effect of SBC —  % —  % 0.1  %
Foreign derived intangible income (6.6) % (5.9) % (5.7) %
Effect of foreign operations taxed at various rates (5.1) % (6.6) % (7.1) %
R&D tax credit (1.1) % (1.6) % (1.5) %
Other (0.3) % (0.3) % 0.2  %
Effective income tax rate 12.5  % 13.4  % 10.6  %
A reconciliation of gross unrecognized tax benefits was as follows:
  Year Ended June 30,
(In thousands) 2025 2024 2023
Unrecognized tax benefits at the beginning of the year $ 245,707  $ 213,092  $ 217,927 
Increases for tax positions taken in current year 35,429  40,209  44,590 
Increases for tax positions taken in prior years 10,862  23,291  434 
Decreases for lapsing of statutes of limitations (17,100) (4,119) (888)
Decreases for tax positions taken in prior years (11,607) (26,766) (3,929)
Decreases for settlements with taxing authorities (4,687) —  (45,042)
Unrecognized tax benefits at the end of the year $ 258,604  $ 245,707  $ 213,092 
The amounts of unrecognized tax benefits that would impact the effective tax rate were $244.9 million, $244.6 million and $199.0 million as of June 30, 2025, 2024 and 2023, respectively. The amounts of interest and penalties recognized during the years ended June 30, 2025, 2024 and 2023 were expenses (benefits) of $9.0 million, $8.3 million and $(20.2) million, respectively. Our policy is to include interest and penalties related to unrecognized tax benefits within Other expense (income), net. The amounts of interest and penalties accrued as of June 30, 2025 and 2024 were $50.1 million and $41.1 million, respectively.
In the normal course of business, we are subject to examination by tax authorities throughout the world. We are subject to U.S. federal income tax examinations for all years beginning from the fiscal year ended June 30, 2022 and are under U.S. federal income tax examination for the fiscal year ended June 30, 2018. We have completed the federal income tax examination for the fiscal years ended June 30, 2019 and June 30, 2020. We are subject to state income tax examinations for all years beginning from the fiscal year ended June 30, 2021. We are also subject to examinations in other major foreign jurisdictions, including Singapore and Israel, for all years beginning from the calendar year ended December 31, 2019. We are under audit in Israel for calendar year 2019 to the fiscal year ended June 30, 2022, and received a tax assessment from the Israel Tax Authority. The assessment will be appealed. We believe our current unrecognized tax benefits are sufficient.
We believe that we may recognize up to $22.7 million of our existing unrecognized tax benefits within the next 12 months as a result of the lapse of statutes of limitations. It is possible that certain income tax examinations may be concluded in the next 12 months. The timing and resolution of income tax examinations are uncertain. Given the uncertainty around the timing of the resolution of these ongoing examinations, we are unable to estimate the full range of possible adjustments to our unrecognized tax benefits within the next 12 months.
Legislative Developments
President Biden signed into law the CHIPS and Science Act of 2022 (“CHIPS Act,” where “CHIPS” stands for Creating Helpful Incentives to Produce Semiconductors) on August 9, 2022. The CHIPS Act provides for various incentives and tax credits among other items, including the Advanced Manufacturing Investment Credit (“AMIC”), which equals 25% of qualified investments in an advanced manufacturing facility that is placed in service after December 31, 2022. There was no material tax impact to our Consolidated Financial Statements from the AMIC provision.
President Biden also signed into law the IRA on August 16, 2022. The IRA has several provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1.0 billion of adjusted financial statement income over a consecutive three-tax-year period. There was no material tax impact to our Consolidated Financial Statements in our fiscal year ended June 30, 2025 from the CAMT provision.
California Governor Newsom approved the 2024-25 California State Budget on June 27, 2024, which includes a provision to suspend the use of all NOLs and limits the use of R&D tax credits to $5 million for tax years 2024 through 2026. This provision will be effective in our fiscal years ended June 30, 2025 through June 30, 2027. There was no material tax impact to our Consolidated Financial Statements in our fiscal year ended June 30, 2025.
In December 2021, the Organization for Economic Co-operation and Development’s Inclusive Framework on Base Erosion and Profit Shifting released Global Anti-Base Erosion (“GloBE”) rules under Pillar Two. For the countries that have enacted legislation to adopt the Pillar Two GloBE rules, the provision requiring a 15% minimum effective tax rate on income earned in the respective countries was effective for us beginning in our fiscal year ended June 30, 2025, and there was no material tax impact to our Consolidated Financial Statements from this Pillar Two provision.
In November 2024, Singapore adopted the Pillar Two GloBE rules under the Multinational Enterprise (“Minimum Tax”) Act (“MMT Act”), which includes a domestic minimum tax of 15% for financial years beginning on or after January 1, 2025. We earn significant profits and currently benefit from tax incentives in Singapore, so it is likely the MMT Act will neutralize our current tax incentives when it is effective for us beginning in our fiscal year ending June 30, 2026. We will continue to evaluate the impact of the MMT Act to our future financial statements. The Pillar Two GloBE rules are deemed an alternative minimum tax so we will not recognize any deferred taxes for the estimated effects of the future minimum tax under current U.S. GAAP.
On July 4, 2025, President Trump signed into law the OBBBA, also known as the Tax Relief for American Families and Workers Act of 2025. The OBBBA provides for several permanent changes to the United States tax code including, among other items, modifying the GILTI and Foreign-Derived Intangible Income rules from the Tax Cuts and Jobs Act, restoring full expensing for domestic research expenses and reinstating 100% bonus depreciation provisions. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, we are evaluating the impact of the OBBBA on our future Consolidated Financial Statements including our cash flows. We may be subject to the CAMT of 15% in future periods as a result of the OBBBA provisions.