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Income Taxes | 12 Months Ended
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May 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE H — INCOME TAXES The provision for income taxes is calculated in accordance with ASC 740, "Income Taxes," which requires the recognition of deferred income taxes using the asset and liability method. Income before income taxes as shown in the Consolidated Statements of Income is summarized below for the periods indicated.
Year Ended May 31, |  | 2023 |  |  | 2022 |  |  | 2021 |
(In thousands) |  |  |  |  |  |  |  |  |
United States |  | $ | 557,401 |  |  | $ | 342,834 |  |  | $ | 462,468 |
Foreign |  |  | 91,981 |  |  |  | 263,965 |  |  |  | 205,970 |
Income Before Income Taxes |  | $ | 649,382 |  |  | $ | 606,799 |  |  | $ | 668,438 |
Provision (benefit) for income taxes consists of the following for the periods indicated:
Year Ended May 31, |  | 2023 |  |  | 2022 |  |  | 2021 |
(In thousands) |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 91,749 |  |  | $ | 60,818 |  |  | $ | 60,666 |
State and local |  |  | 25,972 |  |  |  | 19,495 |  |  |  | 18,959 |
Foreign |  |  | 45,694 |  |  |  | 59,087 |  |  |  | 65,125 |
Total Current |  |  | 163,415 |  |  |  | 139,400 |  |  |  | 144,750 |
Deferred: |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 16,969 |  |  |  | (24,025 | ) |  |  | 20,027 |
State and local |  |  | 4,359 |  |  |  | 2,489 |  |  |  | 3,878 |
Foreign |  |  | (15,092 | ) |  |  | (3,531 | ) |  |  | (3,717 | )
Total Deferred |  |  | 6,236 |  |  |  | (25,067 | ) |  |  | 20,188 |
Provision for Income Taxes |  | $ | 169,651 |  |  | $ | 114,333 |  |  | $ | 164,938 |
The significant components of deferred income tax assets and liabilities as of May 31, 2023 and 2022 were as follows:
|  | 2023 |  |  | 2022 |
(In thousands) |  |  |  |  |  |
Deferred income tax assets related to: |  |  |  |  |  |
Inventories |  | $ | 18,811 |  |  | $ | 15,967 |
Accrued compensation and benefits |  |  | 18,331 |  |  |  | 22,224 |
Accrued other expenses |  |  | 21,037 |  |  |  | 21,782 |
Deferred income and other long-term liabilities |  |  | 30,239 |  |  |  | 25,389 |
Credit and net operating and capital loss carryforwards |  |  | 75,366 |  |  |  | 63,368 |
Net unrealized loss on securities |  |  | 3,373 |  |  |  | 9,386 |
Research and development |  |  | 17,360 |  |  |  | - |
Pension and other postretirement benefits |  |  | 11,813 |  |  |  | 15,699 |
Total Deferred Income Tax Assets |  |  | 196,330 |  |  |  | 173,815 |
Less: valuation allowances |  |  | (30,033 | ) |  |  | (30,509 | )
Net Deferred Income Tax Assets |  |  | 166,297 |  |  |  | 143,306 |
Deferred income tax (liabilities) related to: |  |  |  |  |  |
Depreciation |  |  | (123,421 | ) |  |  | (91,227 | )
Amortization of intangibles |  |  | (116,763 | ) |  |  | (112,349 | )
Unremitted foreign earnings |  |  | (990 | ) |  |  | (3,002 | )
Total Deferred Income Tax (Liabilities) |  |  | (241,174 | ) |  |  | (206,578 | )
Deferred Income Tax Assets (Liabilities), Net |  | $ | (74,877 | ) |  | $ | (63,272 | )
As of May 31, 2023, we had foreign tax credit carryforwards of $31.8 million, which expire at various dates through fiscal 2032. Additionally, as of May 31, 2023, we had approximately $3.2 million of net tax benefits associated with state net operating loss carryforwards and state tax credit carryforwards, some of which expire at various dates beginning in fiscal 2024. As of May 31, 2023, we had foreign net operating loss carryforwards of approximately $148.2 million, of which approximately $37.5 million will expire at various dates beginning in fiscal 2024 and approximately $110.7 million that have an indefinite carryforward period. Additionally, as of May 31, 2023, we had foreign capital loss carryforwards of approximately $23.5 million that can be carried forward indefinitely. When evaluating the realizability of deferred income tax assets, we consider, among other items, whether a jurisdiction has experienced cumulative pretax losses and whether a jurisdiction will generate the appropriate character of income to recognize a deferred income tax asset. More specifically, if a jurisdiction experiences cumulative pretax losses for a period of three years, including the current fiscal year, or if a jurisdiction does not have sufficient income of the appropriate character in the relevant carryback or projected carryforward periods, we generally conclude that it is more likely than not that the respective deferred tax asset will not be realized unless factors such as expected operational changes, availability of prudent and feasible tax planning strategies, reversal of taxable temporary differences or other information exists that would lead us to conclude otherwise. If, after we have evaluated these factors, the deferred income tax assets are not expected to be realized within the carryforward or carryback periods allowed for that jurisdiction, we would conclude that a valuation allowance is required. Total valuation allowances of approximately $30.0 million and $30.5 million have been recorded as of May 31, 2023 and 2022, respectively. These recorded valuation allowances relate primarily to U.S. capital losses, certain foreign net operating losses, certain state net operating losses, and net foreign deferred tax assets. The following table reconciles income tax expense (benefit) computed by applying the U.S. statutory federal income tax rate against income (loss) before income taxes to the provision (benefit) for income taxes:
Year Ended May 31, |  | 2023 |  |  | 2022 |  |  | 2021 |
(In thousands, except percentages) |  |  |  |  |  |  |  |  |
Income tax expense at the U.S. statutory federal income tax rate |  | $ | 136,370 |  |  | $ | 127,428 |  |  | $ | 140,372 |
Foreign rate differential and other foreign tax adjustments |  |  | 1,535 |  |  |  | 6,278 |  |  |  | 11,942 |
State and local income taxes, net |  |  | 22,017 |  |  |  | 20,393 |  |  |  | 18,625 |
Impact of GILTI provisions |  |  | 4,217 |  |  |  | 1,709 |  |  |  | 1,598 |
Nondeductible business expense |  |  | 1,257 |  |  |  | 532 |  |  |  | 616 |
Valuation allowance |  |  | 1,199 |  |  |  | (32,720 | ) |  |  | (4,389 | )
Deferred tax liability for unremitted foreign earnings |  |  | - |  |  |  | (10,686 | ) |  |  | 5,348 |
Changes in unrecognized tax benefits |  |  | (3,334 | ) |  |  | (1,682 | ) |  |  | (1,847 | )
Equity-based compensation |  |  | (3,482 | ) |  |  | (1,776 | ) |  |  | (8,651 | )
Nondeductible goodwill impairment |  |  | 7,264 |  |  |  | - |  |  |  | - |
Other |  |  | 2,608 |  |  |  | 4,857 |  |  |  | 1,324 |
Provision for Income Tax Expense |  | $ | 169,651 |  |  | $ | 114,333 |  |  | $ | 164,938 |
Effective Income Tax Rate |  |  | 26.1 | % |  |  | 18.8 | % |  |  | 24.7 | %
Uncertain income tax positions are accounted for in accordance with ASC 740. The following table summarizes the activity related to unrecognized tax benefits:
(In millions) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance at June 1 |  | $ | 5.7 |  |  | $ | 7.5 |  |  | $ | 9.0 |
Additions for tax positions of prior years |  |  | 0.1 |  |  |  | - |  |  |  | - |
Reductions for tax positions of prior years |  |  | (2.8 | ) |  |  | (1.7 | ) |  |  | (1.8 | )
Foreign currency translation |  |  | (0.1 | ) |  |  | (0.1 | ) |  |  | 0.3 |
Balance at May 31 |  | $ | 2.9 |  |  | $ | 5.7 |  |  | $ | 7.5 |
The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, at May 31, 2023, 2022 and 2021 was $2.9 million, $5.6 million and $7.0 million, respectively. We recognize interest and penalties related to unrecognized tax benefits in income tax expense. At May 31, 2023, 2022 and 2021, the accrual for interest and penalties was $2.2 million, $3.2 million and $2.9 million, respectively. Unrecognized tax benefits, including interest and penalties, have been classified as other long-term liabilities unless expected to be paid in one year. We file income tax returns in the United States and in various state, local and foreign jurisdictions. With limited exceptions, we are subject to federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal 2017 through 2023. We are currently under examination, or have been notified of an upcoming tax examination, for various non-U.S. and domestic state and local jurisdictions. Although it is possible that certain tax examinations could be resolved during the next 12 months, the timing and outcomes are uncertain. Our deferred tax liability for unremitted foreign earnings was $1.0 million as of May 31, 2023, which represents our estimate of the net tax cost associated with the deemed remittance of $204.6 million of foreign earnings that are not considered to be permanently reinvested. We have not provided for U.S. income taxes or foreign withholding taxes on the remaining $1.2 billion of foreign unremitted earnings because such earnings have been retained and reinvested by the foreign subsidiaries as of May 31, 2023. Accordingly, no provision has been made for U.S. income taxes or foreign withholding taxes, which may become payable if the remaining unremitted earnings of foreign subsidiaries were distributed to the United States. Due to the uncertainties and complexities involved in the various options for repatriation of foreign earnings, it is not practical to calculate the deferred taxes associated with the remaining foreign earnings.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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