JACK HENRY & ASSOCIATES INCJKHY
JACK HENRY & ASSOCIATES INC Income Taxes Disclosure
INCOME TAXES
The provision for income taxes consists of the following:
| Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 109,633 | $ | 93,890 | $ | 125,622 | |||||||||||
| State | 24,151 | 23,222 | 30,505 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (5,159) | (1,615) | (40,218) | ||||||||||||||
| State | 1,663 | 706 | (7,981) | ||||||||||||||
| $ | 130,288 | $ | 116,203 | $ | 107,928 | ||||||||||||
The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:
| June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Contract and service revenues | $ | 25,489 | $ | 21,985 | |||||||
Expense reserves and accruals (bad debts and compensation) | 17,022 | 16,123 | |||||||||
| Leasing liabilities | 12,590 | 14,755 | |||||||||
Software development and research and development tax amortization | 14,244 | — | |||||||||
| Net operating loss and tax credit carryforwards | 212 | 2,155 | |||||||||
| Other, net | 2,503 | 3,369 | |||||||||
| Total gross deferred tax assets | 72,060 | 58,387 | |||||||||
| Valuation allowance | (182) | (108) | |||||||||
| Net deferred tax assets | 71,878 | 58,279 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment depreciation | (24,232) | (26,689) | |||||||||
| Intangibles, software development, and research and development tax amortization | (107,083) | (113,623) | |||||||||
| Contract and service costs | (169,579) | (148,126) | |||||||||
| Leasing right-of-use assets | (11,010) | (13,363) | |||||||||
| Total gross deferred liabilities | (311,904) | (301,801) | |||||||||
| Net deferred tax liability | $ | (240,026) | $ | (243,522) | |||||||
The following analysis reconciles the statutory federal income tax rate to the effective income tax rates reflected above:
| Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Computed "expected" tax expense | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Increase (reduction) in taxes resulting from: | |||||||||||||||||
| State income taxes, net of federal income tax benefits | 3.5 | % | 3.8 | % | 3.7 | % | |||||||||||
| Research and development credit | (2.2) | % | (2.6) | % | (2.3) | % | |||||||||||
Changes to prior year uncertain tax positions | (0.3) | % | 0.6 | % | — | % | |||||||||||
| Other (net) | 0.2 | % | 0.5 | % | 0.3 | % | |||||||||||
| 22.2 | % | 23.3 | % | 22.7 | % | ||||||||||||
As of June 30, 2025, the Company has state NOL and tax credit carryforwards with a tax-effected value of $78 and $134, respectively. The state net operating loss and tax credit carryover have varying expiration dates, ranging from fiscal 2026 to 2045. Based on state tax rules which restrict utilization of these losses and tax credits, the Company believes it is more likely than not that $182 of these losses and tax credits will expire unutilized. Accordingly, valuation allowances of $182 and $108 have been recorded against the state net operating losses and tax credit carryforwards as of June 30, 2025, and 2024, respectively.
The Company paid income taxes, net of refunds, of $117,581, $106,966, and $145,862 in fiscal 2025, 2024, and 2023, respectively.
On July 4, 2025, the President of the United States signed into law legislation referred to as “One Big Beautiful Bill Act” (H.R. 1), which enacts substantial changes to the federal income tax law. The legislation includes several business-focused provisions, such as the restoration of immediate expensing for domestic research and development expenditures and the reinstatement of 100% bonus depreciation for qualified property placed in service after January 19, 2025. The Act also permanently extends key provisions from the Tax Cuts and Jobs Act (TCJA). As the legislation was enacted after the June 30, 2025, balance sheet date, the financial implications are not included in the current fiscal year's financial statements. The Company is in the process of assessing the impacts of the new law and plans to incorporate updates in the financial results next fiscal year beginning in the quarter ending September 30, 2025.
At June 30, 2025, the Company had $21,723 of gross unrecognized tax benefits, $19,526 of which, if recognized, would affect its effective tax rate. At June 30, 2024, the Company had $19,077 of gross unrecognized tax benefits, $17,222 of which, if recognized, would affect its effective tax rate. The Company had accrued interest and penalties of $4,375 and $3,351 related to uncertain tax positions at June 30, 2025, and 2024, respectively. The gross unrecognized tax benefits and accrued interest and penalties are recorded as other long-term liabilities in the Company’s consolidated balance sheets, except for $3,449 recorded as deferred income tax liability at June 30, 2025. The income tax provision included interest expense and penalties (or benefits) on unrecognized tax benefits of $796, $1,132, and $529 in the fiscal years ended June 30, 2025, 2024, and 2023, respectively.
A reconciliation of the unrecognized tax benefits for the fiscal years ended June 30, 2025, 2024, and 2023, follows:
| Unrecognized Tax Benefits | |||||
| Balance at July 1, 2022 | $ | 8,990 | |||
| Additions for current year tax positions | 2,570 | ||||
| Additions for prior year tax positions | 2,433 | ||||
| Reductions for prior year tax positions | (350) | ||||
| Reductions related to expirations of statute of limitations | (1,638) | ||||
| Balance at June 30, 2023 | 12,005 | ||||
| Additions for current year tax positions | 3,924 | ||||
| Additions for prior year tax positions | 4,672 | ||||
| Reductions related to expirations of statute of limitations | (1,524) | ||||
| Balance at June 30, 2024 | 19,077 | ||||
| Additions for current year tax positions | 4,480 | ||||
| Additions for prior year tax positions | 834 | ||||
| Reductions for prior year tax positions | (27) | ||||
| Reductions related to expirations of statute of limitations | (2,641) | ||||
| Balance at June 30, 2025 | $ | 21,723 | |||
The U.S. federal and state income tax returns for fiscal 2022 and all subsequent years remain subject to examination as of June 30, 2025, under statute of limitations rules. In addition, certain U.S. state income tax returns remain subject to examination as of June 30, 2025, under the statute of limitation rules for fiscal 2016 through 2022. The Company anticipates that potential changes due to lapsing statutes of limitations and examination closures could reduce the unrecognized tax benefits balance by $3,000 — $9,000 within twelve months of June 30, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 25, 2025 | Showing above |
| 2024 | Aug 26, 2024 | |
| 2023 | Aug 24, 2023 | |
| 2022 | Aug 25, 2022 | |
| 2021 | Aug 25, 2021 | |
| 2020 | Aug 25, 2020 | |
| 2019 | Aug 26, 2019 | |
| 2018 | Aug 24, 2018 | |
| 2017 | Aug 25, 2017 | |
| 2016 | Aug 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.