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INCOME TAXES | 12 Months Ended
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Jul. 31, 2016
INCOME TAXES | 13. INCOME TAXES The components of the provision (benefit) for income taxes from continuing operations are as follows:
|  | July 31, |
Income Taxes: |  | 2016 |  |  | 2015 |  |  | 2014 |
Federal |  | $ | 126,846 |  |  | $ | 98,504 |  |  | $ | 83,374 |
State and local |  |  | 12,716 |  |  |  | 1,222 |  |  |  | (1,383) |
Total current expense |  |  | 139,562 |  |  |  | 99,726 |  |  |  | 81,991 |
Federal |  |  | (13,079) |  |  |  | (7,785) |  |  |  | (3,805) |
State and local |  |  | (1,192) |  |  |  | (1,055) |  |  |  | (883) |
Total deferred (benefit) |  |  | (14,271) |  |  |  | (8,840) |  |  |  | (4,688) |
Total income tax expense |  | $ | 125,291 |  |  | $ | 90,886 |  |  | $ | 77,303 |
The differences between income taxes at the federal statutory rate and the actual income taxes are as follows: |
|  | July 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Provision at federal statutory rate |  | $ | 134,160 |  |  | $ | 102,513 |  |  | $ | 88,487 |
State and local income taxes, net of federal benefit |  |  | 6,599 |  |  |  | 5,144 |  |  |  | 3,748 |
Federal income tax credits and incentives |  |  | (4,194) |  |  |  | (2,207) |  |  |  | (772) |
Domestic production activities deduction |  |  | (12,609) |  |  |  | (9,519) |  |  |  | (7,947) |
Change in uncertain tax positions |  |  | 611 |  |  |  | (5,650) |  |  |  | (6,631) |
Change in current tax payable and deferred tax liabilities |  |  | 103 |  |  |  | 218 |  |  |  | 125 |
Other permanent items |  |  | 621 |  |  |  | 387 |  |  |  | 293 |
Total income tax expense |  | $ | 125,291 |  |  | $ | 90,886 |  |  | $ | 77,303 |
A summary of deferred income taxes is as follows:
|  | July 31, |
|  | 2016 |  |  | 2015 |
Current deferred income tax asset (liability): |  |  |  |  |  |  |  |
Inventory basis |  | $ | – |  |  | $ | 467 |
Employee benefits |  |  | – |  |  |  | 3,625 |
Self-insurance reserves |  |  | – |  |  |  | 10,411 |
Accrued product warranties |  |  | – |  |  |  | 39,486 |
Accrued incentives |  |  | – |  |  |  | 3,959 |
Sales returns and allowances |  |  | – |  |  |  | 1,520 |
Accrued expenses |  |  | – |  |  |  | 2,067 |
Unrecognized tax benefits |  |  | – |  |  |  | 367 |
Other |  |  | – |  |  |  | (2,038) |
Total net current deferred income tax asset |  | $ | – |  |  | $ | 59,864 |
|  | July 31, |
|  | 2016 |  |  | 2015 |
Long-term deferred income tax asset (liability): |  |  |  |  |  |  |  |
Inventory basis |  | $ | 1,196 |  |  | $ | – |
Employee benefits |  |  | 4,587 |  |  |  | – |
Self-Insurance Reserves |  |  | 10,504 |  |  |  | – |
Accrued product warranties |  |  | 43,388 |  |  |  | – |
Accrued incentives |  |  | 5,154 |  |  |  | – |
Sales returns and allowances |  |  | 1,642 |  |  |  | – |
Accrued expenses |  |  | 2,607 |  |  |  | – |
Property, plant and equipment |  |  | (4,164) |  |  |  | (707) |
Deferred compensation |  |  | 9,145 |  |  |  | 6,367 |
Tax credit carry forward |  |  | 256 |  |  |  | 110 |
Intangibles |  |  | (22,308) |  |  |  | (30,246) |
Unrecognized tax benefits |  |  | 4,105 |  |  |  | 3,913 |
Other |  |  | (2,695) |  |  |  | – |
Total net long-term deferred income tax (liability) |  |  | – |  |  |  | (20,563) |
Net deferred tax asset |  | $ | 53,417 |  |  | $ | 39,301 |
As of July 31, 2016, the Company has $2,649 of state tax credit carry forwards that expire from fiscal 2022-2026 of which the Company expects to realize prior to expiration. In addition, the Company has approximately $45,500 of gross state tax Net Operating Loss (“NOL”) carry forwards that expire from fiscal 2017-2036 that the Company does not expect to realize and therefore has been fully reserved. The deferred tax asset of $973 associated with the state tax NOL carry forwards and the related equal and offsetting valuation allowance are not reflected in the table above. In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (“ASU 2015-17”) “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” to simplify the presentation of deferred income taxes. Under the new standard, both deferred tax liabilities and assets are required to be classified as noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2016 with early adoption permitted. This standard is effective for the Company in its fiscal year 2018 beginning on August 1, 2017, however, the Company elected to early adopt this standard beginning with the Annual Report on Form 10-K for the year ended July 31, 2016 and apply the standard prospectively. As a result, $67,344 of net current deferred tax assets and $13,927 of net long-term deferred income tax liabilities were netted together and reclassified to non-current deferred income taxes on the Consolidated Balance Sheet as of July 31, 2016. As permitted by the standard, prior periods were not retrospectively adjusted. Unrecognized Tax Benefits: The benefits of tax positions reflected on income tax returns but whose outcome remains uncertain are only recognized for financial accounting purposes if they meet minimum recognition thresholds. The total amount of unrecognized tax benefits that, if recognized, would have impacted the Company’s effective tax rate were $8,886 for 2016, $8,764 for 2015 and $13,679 for 2014. Changes in the unrecognized tax benefit during fiscal year 2016, 2015 and 2014 were as follows:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Beginning balance |  | $ | 13,156 |  |  | $ | 20,813 |  |  | $ | 32,733 |
Tax positions related to prior years: |  |  |  |  |  |  |  |  |  |  |  |
Additions |  |  | 1,546 |  |  |  | 126 |  |  |  | 9 |
Reductions |  |  | (920) |  |  |  | (7,695) |  |  |  | (9,281) |
Tax positions related to current year: |  |  |  |  |  |  |  |  |  |  |  |
Additions |  |  | 3,123 |  |  |  | 2,858 |  |  |  | 3,804 |
Settlements |  |  | (956) |  |  |  | (1,898) |  |  |  | (5,002) |
Lapses in statute of limitations |  |  | (2,680) |  |  |  | (1,048) |  |  |  | (1,450) |
Ending balance |  | $ | 13,269 |  |  | $ | 13,156 |  |  | $ | 20,813 |
The reductions to the tax positions related to prior years of $9,281 in fiscal year 2014 includes $1,378 of uncertain tax positions that were eliminated as a result of the sale of the bus business. See Note 3 to the Consolidated Financial Statements for further information. It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. Interest and penalties related to unrecognized tax benefits are not included in the schedule above. The total amount of liabilities accrued for interest and penalties related to unrecognized tax benefits as of July 31, 2016, 2015 and 2014 were $1,547, $1,895 and $5,200, respectively. The total amount of interest and penalties expense (benefit) recognized in the Consolidated Statements of Income and Comprehensive Income for the fiscal years ended July 31, 2016, 2015, and 2014 were $(231), $(2,552) and $(3,418), respectively. The total unrecognized tax benefits above, along with the related accrued interest and penalties, are reported within the liability section of the Consolidated Balance Sheets. A portion of the unrecognized tax benefits is classified as short-term and is included in the “Income and other taxes” line of the Consolidated Balance Sheets, while the remainder is classified as a long-term liability. The components of total unrecognized tax benefits are summarized as follows:
|  | July 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Unrecognized tax benefits |  | $ | 13,269 |  |  | $ | 13,156 |  |  | $ | 20,813 |
Reduction to unrecognized tax benefits for tax credit carry forward |  |  | (2,255) |  |  |  | (2,109) |  |  |  | (657) |
Accrued interest and penalties |  |  | 1,547 |  |  |  | 1,895 |  |  |  | 5,200 |
Total unrecognized tax benefits |  | $ | 12,561 |  |  | $ | 12,942 |  |  | $ | 25,356 |
Short-term, included in “Income and other taxes” |  | $ | 2,586 |  |  | $ | 997 |  |  | $ | 1,667 |
Long-term |  |  | 9,975 |  |  |  | 11,945 |  |  |  | 23,689 |
Total unrecognized tax benefits |  | $ | 12,561 |  |  | $ | 12,942 |  |  | $ | 25,356 |
The Company anticipates a decrease of approximately $5,193 in unrecognized tax benefits and $857 in interest during fiscal 2017 from expected settlements or payments of uncertain tax positions and lapses of the applicable statutes of limitations. Actual results may differ from these estimates. Generally, fiscal years 2013, 2014 and 2015 remain open for federal income tax purposes and fiscal years 2012, 2013, 2014 and 2015 remain open for state and Canadian income tax purposes. The Company and its subsidiaries file a consolidated U.S. federal income tax return and multiple state income tax returns. The Company is currently being audited by the IRS for tax year end July 31, 2014 and the state of California for tax years ended July 31, 2013 and 2014. In addition, the Company is currently disputing the audit results by the state of Indiana for tax years ended July 31, 2008, 2009 and 2010. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions related to its Federal, California and Indiana income tax returns in its liability for unrecognized tax benefits.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: 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=65882285&loc=d3e32559-109319 Reference 3: 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=65882285&loc=d3e32718-109319 Reference 4: 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=65882285&loc=d3e32639-109319 Reference 5: 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=65882285&loc=d3e32537-109319 + Details
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