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Income Taxes | 12 Months Ended
--- | ---
Jul. 31, 2011
Income Tax Disclosure [Abstract] |
Income Taxes |
(12) |  | Income Taxes
Income from continuing operations before taxes consists of the following (in thousands):
|  |  |  | Years Ended July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2011 |  | 2010 |  | 2009
US |  |  |  | $ | 234,035 |  |  | $ | 217,947 |  |  | $ | 220,005 |
Non US |  |  |  |  | 29,842 |  |  |  | 21,548 |  |  |  | 7,727 |
Total income before taxes |  |  |  | $ | 263,877 |  |  | $ | 239,495 |  |  | $ | 227,732 |
79 COPART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JULY 31, 2011, 2010 AND 2009 The Company’s income tax expense (benefit) from continuing operations consists of (in thousands):
|  |  |  | Years Ended July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2011 |  | 2010 |  | 2009
Federal: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  | $ | 84,119 |  |  | $ | 83,791 |  |  | $ | 78,817 |
Deferred |  |  |  |  | 278 |  |  |  | (3,714 | ) |  |  | 168 |
|  |  |  |  | 84,397 |  |  |  | 80,077 |  |  |  | 78,985 |
State: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  |  | 7,186 |  |  |  | 6,664 |  |  |  | 8,151 |
Deferred |  |  |  |  | (128 | ) |  |  | 473 |  |  |  | (2 | )
|  |  |  |  | 7,058 |  |  |  | 7,137 |  |  |  | 8,149 |
Foreign: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  |  | 5,818 |  |  |  | 1,916 |  |  |  | 1,651 |
Deferred |  |  |  |  | 229 |  |  |  | (1,262 | ) |  |  | (599 | )
|  |  |  |  | 6,047 |  |  |  | 654 |  |  |  | 1,052 |
|  |  |  | $ | 97,502 |  |  | $ | 87,868 |  |  | $ | 88,186 |
A reconciliation by year of the expected US statutory tax rate (35% of income before income taxes) to the actual effective income tax rate is as follows:
|  |  |  | Years Ended July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2011 |  | 2010 |  | 2009
Federal statutory rate |  |  |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes, net of federal income tax benefit |  |  |  |  | 1.7 |  |  |  | 2.0 |  |  |  | 3.5 |
Foreign |  |  |  |  | (0.4 | ) |  |  | (1.7 | ) |  |  | (0.8 | )
Compensation and fringe benefits |  |  |  |  | 0.2 |  |  |  | 0.2 |  |  |  | 0.3 |
Other differences |  |  |  |  | 0.4 |  |  |  | 1.2 |  |  |  | 0.7 |
Effective tax rate |  |  |  |  | 36.9 | % |  |  | 36.7 | % |  |  | 38.7 | %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below, (in thousands):
|  |  |  | July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2011 |  | 2010
Deferred tax assets: |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  |  |  | $ | 1,063 |  |  | $ | 982 |
Accrued compensation and benefits |  |  |  |  | 18,249 |  |  |  | 13,898 |
State taxes |  |  |  |  | 1,488 |  |  |  | 1,358 |
Accrued other |  |  |  |  | 3,006 |  |  |  | 1,884 |
Deferred revenue |  |  |  |  | — |  |  |  | 1,910 |
Property and equipment |  |  |  |  | 3,378 |  |  |  | 8,693 |
State net operating losses |  |  |  |  | 398 |  |  |  | 327 |
Long-term note write off |  |  |  |  | — |  |  |  | 423 |
Federal tax benefit |  |  |  |  | 5,758 |  |  |  | 4,348 |
Total gross deferred tax assets |  |  |  |  | 33,340 |  |  |  | 33,823 |
Less valuation allowance |  |  |  |  | (948 | ) |  |  | (787 | )
Net deferred tax assets |  |  |  |  | 32,392 |  |  |  | 33,036 |
80 COPART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JULY 31, 2011, 2010 AND 2009
|  |  |  | July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2011 |  | 2010
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |
Vehicle pooling costs |  |  |  |  | (4,956 | ) |  |  | (9,414 | )
Prepaid insurance |  |  |  |  | (1,397 | ) |  |  | (671 | )
Deferred revenue |  |  |  |  | (1,721 | ) |  |  | — |
Intangibles and goodwill |  |  |  |  | (25,031 | ) |  |  | (23,640 | )
Workers compensation |  |  |  |  | (359 | ) |  |  | — |
Total gross deferred tax liabilities |  |  |  |  | (33,464 | ) |  |  | (33,725 | )
Net deferred tax liability |  |  |  | $ | (1,072 | ) |  | $ | (689 | )
The above net deferred tax liability has been reflected in the accompanying consolidated balance sheets as follows (in thousands):
|  |  |  | July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2010 |  | 2010
North America current liabilities |  |  |  | $ | 440 |  |  | $ | 1,154 |
North America non-current assets |  |  |  |  | (9,425 | ) |  |  | (10,213 | )
UK non-current liabilities |  |  |  |  | 10,057 |  |  |  | 9,748 |
Net deferred tax liability |  |  |  | $ | 1,072 |  |  | $ | 689 |
The Company’s ability to realize deferred tax assets is dependent on its ability to generate future taxable income. Accordingly, the Company has established a valuation allowance in taxable jurisdictions where the utilization of the tax assets is uncertain. Additional timing differences or future tax losses may occur which could warrant a need for establishing additional valuation allowances against certain deferred tax assets. The valuation allowance for the years ended July 31, 2011 and 2010 was $0.9 million and $0.8 million, respectively. At July 31, 2011 and 2010, if recognized, the portion of liabilities for unrecognized tax benefits that would favorably affect the Company’s effective tax rate is $13.2 million and $9.9 million, respectively. It is possible that the amount of unrecognized tax benefits will change in the next twelve months, due to tax legislation updates or future audit outcomes; however an estimate of the range of the possible change cannot be made at this time. The following table summarizes the activities related to the Company’s unrecognized tax benefits (in thousands):
|  |  |  | Years Ended July 31, |
--- | --- | --- | --- | --- | ---
|  |  |  | 2011 |  | 2010
Balance as of August 1 |  |  |  | $ | 18,144 |  |  | $ | 15,965 |
Increases related to current year tax positions |  |  |  |  | 1,592 |  |  |  | 4,514 |
Prior year tax positions: |  |  |  |  |  |  |  |  |  |
Prior year increase |  |  |  |  | 519 |  |  |  | 74 |
Prior year decrease |  |  |  |  | (531 | ) |  |  | (532 | )
Cash settlement |  |  |  |  | — |  |  |  | (302 | )
Lapse of statute of limitations |  |  |  |  | (930 | ) |  |  | (1,575 | )
Balance at July 31 |  |  |  | $ | 18,794 |  |  | $ | 18,144 |
It is the Company’s continuing practice to recognize interest and penalties related to income tax matters in income tax expense. As of July 31, 2011 and 2010, the Company had accrued interest and penalties related to the unrecognized tax benefits of $6.0 million and $5.2 million, respectively. 81 COPART, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JULY 31, 2011, 2010 AND 2009 The Company is currently under audit by the states of Florida and Connecticut for fiscal years 2007, 2008 and 2009. The Company is no longer subject to US federal and state income tax examination for fiscal years prior to 2008, with the exception of Florida and Connecticut. In fiscal years 2011, 2010 and 2009, the Company recognized a tax benefit of $3.6 million, $6.2 million and $4.6 million, respectively, upon the exercise of certain stock options which is reflected in shareholders’ equity. The Company has not provided for US federal income and foreign withholding taxes on its $42 million foreign subsidiaries’ undistributed earnings as of July 31, 2011, because the Company intends to reinvest such earnings indefinitely in the operations and potential acquisitions related to its foreign operations. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to US income taxes (subject to an adjustment for foreign tax credits). It is not practical to determine the income tax liability that might be incurred if these earnings were to be distributed.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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