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Income Taxes | 6 Months Ended
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Nov. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 7 — INCOME TAXES The effective income tax rate of 13.9% for the three months ended November 30, 2024 compares to the effective income tax rate of 25.5% for the three months ended November 30, 2023. The effective income tax rate of 18.2% for the six months ended November 30, 2024 compares to the effective income tax rate of 25.3% for the six months ended November 30, 2023. The effective income tax rates for the three- and six-month periods ended November 30, 2024 and 2023 reflect variances from the 21% statutory rate due to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions, partially offset by tax benefits related to equity compensation and foreign tax credits. Additionally, the effective income tax rate for the current three- and six-month periods ended November 30, 2024, reflect adjustments made to our deferred income taxes. During the quarter ended November 30, 2024, we reassessed certain of our income tax positions following recent developments in U.S. income tax case law. Based on our current analysis and interpretations, we recorded a gross favorable income tax adjustment of $43.9 million which reflects an increase in our deferred income tax assets for U.S. foreign tax credit carryforwards. Further, we assessed our ability to fully realize the deferred income tax assets associated with these incremental U.S. foreign tax credits during the respective carryforward periods. As of November 30, 2024, we concluded that a valuation allowance of $22.1 million should be recorded. The valuation allowance reduces the benefit for the aforementioned gross deferred tax asset adjustment to a net amount of $21.8 million, which reflects our current estimate of the amount of the deferred tax asset for these credits we expect to realize during the carryforward periods. The effective income tax rate for the six-month period ended November 30, 2024, also reflects a favorable adjustment for incremental U.S. foreign tax credits associated with a distribution of historic foreign earnings that were previously not considered to be permanently reinvested. The distribution of such earnings was done in conjunction with the execution of global cash redeployment and debt optimization projects. Our deferred tax liability for unremitted foreign earnings was adjusted to $4.1 million as of May 31, 2024. The $4.1 million represented our estimate of the net tax cost of remitting of $285.6 million of foreign earnings that were not considered to be permanently reinvested. As of November 30, 2024, the amount of these earnings has changed to $157.2 million and we no longer have a tax liability associated with remitting these earnings. The reduction to the earnings amounts no longer permanently reinvested is due principally to distributions of such earnings during the quarter. We have not provided for foreign withholding or income taxes on the remaining foreign subsidiaries’ undistributed earnings because such earnings have been retained and reinvested by the subsidiaries as of November 30, 2024. Accordingly, no provision has been made for foreign withholding or income taxes, which may become payable if the remaining undistributed earnings of foreign subsidiaries were remitted to us as dividends. The Organization for Economic Co-operation and Development (“OECD”) has proposed a framework comprised of rules and models, collectively referred to as Pillar Two (“P2”), that are designed to ensure that certain multi-national enterprises pay a minimum tax rate of 15% on reported profits arising in each jurisdiction where they operate. Although the OECD provided a framework for applying the minimum tax, individual countries have and may continue to enact P2 rules that are different than the OECD framework. While we continue to monitor P2 developments, we do not anticipate that P2 will have a material impact on our long-term financial position.

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