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Income Taxes | 12 Months Ended
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Jul. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 12 — Income Taxes Income before taxes consisted of the following:
|  | Year Ended July 31, |  |  |  |
(In thousands) |  | 2020 |  | 2019 |  | 2018
U.S. |  | $ | 740,171 |  |  | $ | 634,874 |  |  | $ | 501,961 |
International |  | 60,668 |  |  | 70,077 |  |  | 60,550 |
Total income before taxes |  | $ | 800,839 |  |  | $ | 704,951 |  |  | $ | 562,511 |
Income tax expense (benefit) from continuing operations consisted of the following:
|  | Year Ended July 31, |  |  |  |
(In thousands) |  | 2020 |  | 2019 |  | 2018
Federal: |  |  |  |  |  |
Current |  | $ | 53,942 |  |  | $ | 59,848 |  |  | $ | 109,804 |
Deferred |  | 21,019 |  |  | 27,779 |  |  | 17,094 |
|  | 74,961 |  |  | 87,627 |  |  | 126,898 |
State: |  |  |  |  |  |
Current |  | 12,095 |  |  | 12,720 |  |  | 9,100 |
Deferred |  | 565 |  |  | 702 |  |  | (111) |
|  | 12,660 |  |  | 13,422 |  |  | 8,989 |
International: |  |  |  |  |  |
Current |  | 13,333 |  |  | 12,508 |  |  | 8,820 |
Deferred |  | (22) |  |  | (299) |  |  | (203) |
|  | 13,311 |  |  | 12,209 |  |  | 8,617 |
Income tax expense |  | $ | 100,932 |  |  | $ | 113,258 |  |  | $ | 144,504 |
A reconciliation of the expected U.S. statutory tax rate to the actual effective income tax rate is as follows:
|  | Year Ended July 31, |  |  |  |
(In thousands) |  | 2020 |  | 2019 |  | 2018
Federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 26.9 | %
State income taxes, net of federal income tax benefit |  | 1.6 | % |  | 1.4 | % |  | 1.3 | %
International rate differential |  | 0.1 | % |  | 0.3 | % |  | (0.8) | %
Compensation and fringe benefits (1) |  | (11.2) | % |  | (6.4) | % |  | (3.5) | %
GILTI, FDII, and transition tax |  | (0.3) | % |  | (0.7) | % |  | 2.2 | %
Deferred tax remeasurement |  | — | % |  | — | % |  | (0.8) | %
Other differences |  | 1.4 | % |  | 0.5 | % |  | 0.4 | %
Effective tax rate |  | 12.6 | % |  | 16.1 | % |  | 25.7 | %
(1)Included in the compensation and fringe benefits rate reconciliation is the impact of the Company’s adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Under this standard, all excess tax benefits and tax deficiencies related to exercises of stock options are recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) are presented below:
|  | July 31, |  |
(In thousands) |  | 2020 |  | 2019
Deferred tax assets: |  |  |  |
Allowance for doubtful accounts |  | $ | 1,141 |  |  | $ | 919 |
Accrued compensation and benefits |  | 13,217 |  |  | 18,397 |
State taxes |  | 460 |  |  | 559 |
Accrued other |  | 4,763 |  |  | 3,312 |
Deferred revenue |  | 1,950 |  |  | 1,322 |
Losses carried forward |  | 15,092 |  |  | 7,631 |
Federal tax benefit |  | 9,872 |  |  | 7,998 |
Total gross deferred tax assets |  | 46,495 |  |  | 40,138 |
Less: Valuation allowance |  | (15,429) |  |  | (8,578) |
Net deferred tax assets |  | 31,066 |  |  | 31,560 |
Deferred tax liabilities: |  |  |  |
Vehicle pooling costs |  | (15,291) |  |  | (15,731) |
Property and equipment |  | (62,123) |  |  | (38,475) |
Prepaid insurance |  | (1,411) |  |  | (987) |
Intangibles and goodwill |  | (23,714) |  |  | (24,639) |
Total gross deferred tax liabilities |  | (102,539) |  |  | (79,832) |
Net deferred tax liabilities |  | $ | (71,473) |  |  | $ | (48,272) |
The above net deferred tax assets and liabilities have been reflected in the accompanying consolidated balance sheets as follows:
|  | July 31, |  |
(In thousands) |  | 2020 |  | 2019
U.S. non-current liabilities |  | $ | (66,082) |  |  | $ | (44,499) |
International non-current liabilities |  | (5,391) |  |  | (3,773) |
Net deferred tax liabilities |  | $ | (71,473) |  |  | $ | (48,272) |
On December 22, 2017 legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Act”), was enacted. The Act included a one-time tax on accumulated unremitted earnings of the Company’s foreign subsidiaries (“Transition Tax”). In fiscal 2018, the Company recorded a $12.4 million Transition Tax charge. The Act reduced the federal statutory tax rate from 35.0% to 21.0%, effective January 1, 2018, which results in federal statutory tax rates for the Company of 21.0%, 21.0%, and 26.9% for fiscal years 2020, 2019 and 2018, respectively. In fiscal year 2018 the Company recorded a $4.3 million benefit to remeasure deferred taxes as of the enactment date of the Act to reflect the federal statutory rate reduction. In fiscal year 2019, the Company completed its accounting for the tax effects of the enactment of the Tax Act and recorded a discrete decrease in tax expense of $1.1 million, whose effect on the Company’s effective tax rate was immaterial. The Act contains Global Intangible Low-Taxed Income (“GILTI”) provisions, which first impacted the Company in fiscal year 2019. The GILTI provisions effectively subject income earned by the Company's foreign subsidiaries to current U.S. tax at a rate of 10.5%, less foreign tax credits. Under U.S. GAAP, the Company can make an accounting policy election to either recognize deferred taxes for temporary differences expected to impact GILTI in future years or provide for tax expense related to GILTI in the year the tax is incurred as a period expense. The Company has elected to treat tax generated by GILTI provisions as a period expense. The Act also includes a favorable tax treatment for certain Foreign Derived Intangible Income (“FDII”), effective for the Company starting August 1, 2018. The Company’s estimate for both GILTI and FDII did not materially impact the effective income tax rate or income tax expense for the fiscal year ended July 31, 2020 or 2019. As of July 31, 2020 and 2019, the Company had foreign operating losses and a U.S. federal tax credit carryforward of $15.1 million and $8.2 million, respectively. The foreign operating losses, subject to certain limitations, usually can be carried forward indefinitely. The U.S. federal related tax credit, if not used, would start to expire after 2026. 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, 2020 and 2019 was $15.4 million and $8.6 million, respectively. The valuation allowance for deferred tax assets primarily related to operating losses in certain international jurisdictions and certain tax credits that are unlikely to be realized. The following table summarizes the activities related to the Company’s unrecognized tax benefits resulting from uncertain tax positions:
|  | July 31, |  |  |  |
(In thousands) |  | 2020 |  | 2019 |  | 2018
Beginning balance |  | $ | 27,537 |  |  | $ | 21,322 |  |  | $ | 19,269 |
Increases related to current year tax position |  | 8,196 |  |  | 6,588 |  |  | 5,169 |
Prior year tax positions: |  |  |  |  |  |
Prior year increase |  | 6,390 |  |  | 800 |  |  | 554 |
Prior year decrease |  | (1,603) |  |  | (305) |  |  | (2,079) |
Cash settlement |  | (1,182) |  |  | (534) |  |  | (519) |
Lapse of statute of limitations |  | (3,215) |  |  | (334) |  |  | (1,072) |
Ending balance |  | $ | 36,123 |  |  | $ | 27,537 |  |  | $ | 21,322 |
As of July 31, 2020 and 2019, if recognized, the portion of liabilities for unrecognized tax benefits resulting from uncertain tax positions that would favorably affect the Company’s effective tax rate was $29.0 million and $22.0 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 Company recognizes interest and penalties related to income tax matters in income tax expense. As of July 31, 2020, 2019 and 2018, the Company had accrued interest and penalties related to unrecognized tax benefits of $8.9 million, $7.6 million and $6.0 million, respectively. The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is currently under examination by certain taxing authorities in the U.S. for fiscal years between 2014 and 2018. At this time, the Company does not believe that the outcome of any examination will have a material impact on the Company’s consolidated results of operations and financial position. The Act significantly lowered the additional federal income tax upon the repatriation of undistributed earnings generated by our foreign subsidiaries. As the Company determined these undistributed foreign earnings along with any additional outside basis differences were indefinitely reinvested as of July 31, 2020, no deferred tax was therefore provided. Although the Company would not anticipate any significant tax liability associated with the repatriation of the undistributed earnings, which were $163.0 million as of July 31, 2020, nevertheless, it is not practical to estimate the amount of deferred tax liability related to the entire outside basis differences due to the complexity of the calculation and the uncertainty regarding assumptions necessary to compute the tax. The Company’s effective income tax rates were 12.6%, 16.1%, and 25.7% for fiscal 2020, 2019 and 2018, respectively. The Company’s U.S. federal statutory tax rate for fiscal year 2020 was 21.0% and was negatively impacted by $1.7 million of discrete tax items related to amending previously filed income tax returns. The effective tax rate for the fiscal year ending July 31, 2019, was computed based on a reduced blended U.S. federal statutory tax rate of 21.0% and was favorably impacted by $10.2 million of discrete tax items related to amending previously filed income tax returns. The effective tax rate for the fiscal year ending July 31, 2018, was computed based on a reduced blended U.S. federal statutory tax rate of 26.9% and included the effects of the Act. The tax rates were also impacted from the result of recognizing excess tax benefits from the exercise of employee stock options of $92.5 million, $46.1 million and $21.3 million, for the years ended July 31, 2020, 2019 and 2018, respectively.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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