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Income Taxes
 12 Months Ended
Aug. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We account for income taxes using the asset and liability approach as prescribed by ASC Topic 740, Income Taxes (“ASC 740”). This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Using the enacted tax rates in effect for the year in which the differences are expected to reverse, deferred tax liabilities and assets are determined based on the differences between the financial reporting and the tax basis of an asset or liability.
The Organization for Economic Co-operation and Development (“OECD”) released the Global Anti-base Erosion (“GloBE”) Model Rules for Pillar Two on December 20, 2021, which defined a 15% global minimum tax. Since the model rules have been released, many countries have enacted or continue to consider changes in their tax laws and regulations based on the Pillar Two proposals, some of which become effective for us in fiscal 2025. We are continuing to evaluate the impact of these proposed and enacted legislative changes as new guidance becomes available. We do not expect Pillar Two to have a material impact on our financial statements as most jurisdictions in which we operate have an effective tax rate above the 15% threshold.
On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. Among other provisions, the IRA includes a 15% corporate alternative minimum tax rate applicable for our fiscal 2024 taxable year as well as a 1% federal excise tax on corporate stock repurchases made after December 31, 2022, which we account for as an increase to the cost basis of our share repurchases. The IRA did not have a material impact on our financial condition, results of operations, or cash flows.
Internal Revenue Code (“IRC”) Section 174 was enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”). IRC Section 174, which became effective for us during fiscal 2023, requires us to capitalize research and development expenditures and amortize them on our U.S. tax return over five or fifteen years, depending on where research is conducted. The fiscal 2023 year over year change in both our provision for current federal taxes and (benefit from) provision for deferred taxes relates principally to the application of IRC Section 174.
The provision for income taxes consists of the following components during the periods presented (in millions):
 Year Ended August 31,
 202420232022
Provision for current federal taxes$113.6 $105.8 $67.6 
Provision for current state taxes26.6 15.7 16.3 
Provision for current foreign taxes19.4 27.0 25.4 
(Benefit from) provision for deferred taxes(33.6)(47.8)0.6 
Total provision for income taxes$126.0 $100.7 $109.9 
The following table presents income before income taxes for our domestic and foreign operations for the periods presented: (in millions):
 Year Ended August 31,
 202420232022
Domestic$472.4 $367.5 $409.6 
International76.2 79.2 84.3 
Income before income taxes$548.6 $446.7 $493.9 
The following table reconciles the provision at the federal statutory rate to the total provision for income taxes during the periods presented (in millions):
 Year Ended August 31,
 202420232022
Federal income tax computed at statutory rate$115.2 $93.8 $103.7 
State income tax, net of federal income tax benefit19.7 11.4 13.5 
Federal permanent differences2.1 2.2 (4.3)
Foreign permanent differences and rate differential2.3 4.4 4.3 
Research and development tax credits(10.1)(8.3)(7.6)
Unrecognized tax benefits2.0 1.9 2.1 
Other, net(5.2)(4.7)(1.8)
Total provision for income taxes$126.0 $100.7 $109.9 
Components of the net deferred income tax liabilities as of the dates presented include (in millions):
 August 31,
 20242023
Deferred income tax liabilities:  
Depreciation$(21.8)$(21.5)
Goodwill and intangibles(150.2)(151.2)
Operating lease right of use assets(15.8)(19.8)
Other liabilities(1.8)(3.4)
Total deferred income tax liabilities(189.6)(195.9)
Deferred income tax assets:  
Self-insurance2.1 1.7 
Pension6.7 5.9 
Deferred compensation24.5 23.1 
Net operating losses7.1 6.2 
Other accruals not yet deductible43.3 43.4 
Operating lease liabilities18.5 22.6 
Capitalized research and development70.1 41.5 
Other assets14.0 15.4 
Total deferred income tax assets186.3 159.8 
Valuation allowance(20.4)(19.9)
Net deferred income tax liabilities$(23.7)$(56.0)
As of August 31, 2024, the estimated undistributed earnings from foreign subsidiaries was $305.5 million. We have recorded a deferred income tax liability of $0.4 million for certain foreign withholding taxes and U.S. taxes related to foreign earnings for which we do not assert indefinite reinvestment. With respect to unremitted earnings and original investments in foreign subsidiaries where we are continuing to assert indefinite reinvestment, any future remittances could be subject to additional foreign withholding taxes, U.S. state taxes, and certain tax impacts relating to foreign currency exchange effects. It is not practicable to estimate the amount of any unrecognized tax effects on these reinvested earnings and original investments in foreign subsidiaries. We account for the tax on Global Intangible Low-Taxed Income (“GILTI”) as a period cost and, therefore, do not record deferred taxes related to GILTI on our foreign subsidiaries.
At August 31, 2024, we had federal tax credit carryforwards of approximately $10.5 million that begin to expire in 2029, and state tax credit carryforwards of approximately $0.9 million that begin to expire in 2027. Approximately $9.7 million of the total $10.5 million in federal tax credit carryforwards are subject to a full valuation allowance as we do not expect to realize any future tax benefit for these items. At August 31, 2024, we had federal net operating
loss carryforwards of $10.5 million that begin to expire in 2029, state net operating loss carryforwards of $28.8 million that begin to expire in 2025, and foreign net operating loss carryforwards of $14.6 million that begin to expire in 2028.
The gross amount of unrecognized tax benefits as of August 31, 2024 and 2023 totaled $21.1 million and $20.1 million, respectively. The amount of unrecognized tax benefits the would affect the company's effective income tax rate was $21.1 million and $20.1 million as of August 31, 2024 and 2023, respectively. We recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense; such accrued interest and penalties are not material. With few exceptions, we are no longer subject to United States federal, state, and local income tax examinations for years ended before 2018 or for foreign income tax examinations before 2017. We anticipate that unrecognized tax benefits may decrease within the next 12 months by $11.8 million of which $3.5 million is interest due to the expiring of the statute of limitations.
The following table reconciles the change in the unrecognized income tax benefit (reported in Other long-term liabilities on the Consolidated Balance Sheets) during the periods presented (in millions):
Year Ended August 31,
202420232022
Unrecognized tax benefits balance at beginning of year$20.1 $19.5 $17.7 
Additions based on tax positions related to the current year4.2 4.3 3.5 
Additions for tax positions of prior years— 1.4 0.1 
Reductions for tax positions of prior years(0.1)(1.7)(0.2)
Reductions due to settlements— (0.5)— 
Reductions due to lapse of statute of limitations(3.1)(2.9)(1.6)
Unrecognized tax benefits balance at end of year$21.1 $20.1 $19.5 
Total accrued interest was $4.6 million, $3.3 million, and $2.1 million as of August 31, 2024, 2023, and 2022, respectively. There were no accruals related to income tax penalties during fiscal 2024. Interest, net of tax benefits, and penalties are included in Income tax expense within the Consolidated Statements of Comprehensive Income. We are routinely under audit from various tax jurisdictions. We do not currently anticipate material audit assessments.