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INCOME TAXES | 12 Months Ended
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Jul. 31, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | 13. INCOME TAXES The components of the provision (benefit) for income taxes from continuing operations are as follows:
|  | July 31, |
Income Taxes: |  | 2018 |  |  | 2017 |  |  | 2016 |
Federal |  | $ | 166,402 |  |  | $ | 200,370 |  |  | $ | 126,846 |
State and local |  |  | 21,025 |  |  |  | 20,941 |  |  |  | 12,716 |
Total current expense |  |  | 187,427 |  |  |  | 221,311 |  |  |  | 139,562 |
Federal |  |  | 17,820 |  |  |  | (37,033 | ) |  |  | (13,079 | )
State and local |  |  | (2,369 | ) |  |  | (2,146 | ) |  |  | (1,192 | )
Total deferred expense (benefit) |  |  | 15,451 |  |  |  | (39,179 | ) |  |  | (14,271 | )
Total income tax expense |  | $ | 202,878 |  |  | $ | 182,132 |  |  | $ | 125,291 |
The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law on December 22, 2017. Under the Tax Act, the federal corporate income tax rate has been reduced from 35.0% to 21.0% starting January 1, 2018, which results in the use of a blended federal corporate income tax rate of 26.9% for the Company’s 2018 fiscal year. Other significant changes to corporate taxation most relevant to the Company include accelerated expensing for certain business assets, the repeal of the domestic production deduction, additional limitations on the deductibility of interest expense and expanded limitations on the deductibility of executive compensation. The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act for which the accounting under ASC 740 is incomplete. The rules allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. Accordingly, as of July 31, 2018 we have not completed our accounting for the tax effects of the Tax Act. For the fiscal year ended July 31, 2018, the Company has recorded a provisional amount of $34,000 of additional deferred income tax expense related to the re-measurement of our net deferred tax assets using its best estimates based on reasonable and supportable assumptions and information as of the reporting date. The Company recorded a provisional amount of $2,000 in the fourth quarter of fiscal 2018 of additional income tax expense as a result of recent guidance from the Internal Revenue Service related to limitations on the deductibility of executive compensation as provided under the Tax Act. The Company is still analyzing the impacts of the Tax Act which could potentially affect the measurement of the deferred tax balances. While the effective date of most of the provisions of the Tax Act do not apply until fiscal 2019, the Company will continue its assessment of the impact of the Tax Act on the business throughout the one year measurement period as provided by SAB 118. The amounts recorded as of July 31, 2018 are subject to adjustment as further guidance becomes available, additional facts become known or estimation approaches are refined. The differences between income taxes at the federal statutory rate and the actual income taxes are as follows:
|  | July 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Provision at federal statutory rate |  | $ | 170,095 |  |  | $ | 194,735 |  |  | $ | 134,160 |
State and local income taxes, net of federal benefit |  |  | 14,255 |  |  |  | 11,021 |  |  |  | 6,599 |
Federal income tax credits and incentives |  |  | (3,518) |  |  |  | (3,228) |  |  |  | (4,194) |
Domestic production activities deduction |  |  | (16,175) |  |  |  | (19,527) |  |  |  | (12,609) |
Change in uncertain tax positions |  |  | 396 |  |  |  | 375 |  |  |  | 611 |
Effect of U.S. federal tax reform |  |  | 38,620 |  |  |  | – |  |  |  | – |
Other |  |  | (795) |  |  |  | (1,244) |  |  |  | 724 |
Total income tax expense |  | $ | 202,878 |  |  | $ | 182,132 |  |  | $ | 125,291 |
Under Internal Revenue Code Section 15(a), companies are required to calculate their federal statutory tax rate by using a blended rate based on the date of enactment of the Tax Act. The federal blended rate for the Company is 26.9% for fiscal 2018. A summary of deferred income taxes is as follows:
|  | July 31, |
|  | 2018 |  |  | 2017 |
Deferred income tax asset (liability): |  |  |  |  |  |  |  |
Inventory basis |  | $ | 922 |  |  | $ | 1,460 |
Employee benefits |  |  | 3,427 |  |  |  | 6,471 |
Self-Insurance Reserves |  |  | 6,368 |  |  |  | 9,940 |
Accrued product warranties |  |  | 62,332 |  |  |  | 73,393 |
Accrued incentives |  |  | 5,235 |  |  |  | 6,175 |
Sales returns and allowances |  |  | 1,741 |  |  |  | 2,340 |
Accrued expenses |  |  | 1,905 |  |  |  | 3,399 |
Property, plant and equipment |  |  | (9,060) |  |  |  | (8,151) |
Deferred compensation |  |  | 12,864 |  |  |  | 14,556 |
Intangibles |  |  | (9,151) |  |  |  | (17,184) |
Unrecognized tax benefits |  |  | 2,581 |  |  |  | 3,925 |
Other |  |  | (720) |  |  |  | (3,355) |
Deferred income tax asset, net |  | $ | 78,444 |  |  | $ | 92,969 |
As of July 31, 2018, the Company has $996 of state tax credit carry forwards that expire from fiscal 2027-2028 of which the Company expects to realize prior to expiration. In addition, the Company has $9,141 of gross state tax Net Operating Loss (“NOL”) carry forwards that expire from fiscal 2019-2038 that the Company does not expect to realize and therefore has been fully reserved. The deferred tax asset of $525 associated with the state tax NOL carry forwards and the related equal and offsetting valuation allowance are not reflected in the table above. 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 $10,491 for fiscal 2018, $8,477 for fiscal 2017 and $8,886 for fiscal 2016. Changes in the unrecognized tax benefit during fiscal years 2018, 2017 and 2016 were as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Beginning balance |  | $ | 12,671 |  |  | $ | 13,269 |  |  | $ | 13,156 |
Tax positions related to prior years: |  |  |  |  |  |  |  |  |  |  |  |
Additions |  |  | 353 |  |  |  | 75 |  |  |  | 1,546 |
Reductions |  |  | (2,203) |  |  |  | (1,510) |  |  |  | (920) |
Tax positions related to current year: |  |  |  |  |  |  |  |  |  |  |  |
Additions |  |  | 3,629 |  |  |  | 3,853 |  |  |  | 3,123 |
Settlements |  |  | (192) |  |  |  | (1,450) |  |  |  | (956) |
Lapses in statute of limitations |  |  | (1,254) |  |  |  | (1,566) |  |  |  | (2,680) |
Ending balance |  | $ | 13,004 |  |  | $ | 12,671 |  |  | $ | 13,269 |
It is the Company’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in income tax expense. The total amount of liabilities accrued for interest and penalties related to unrecognized tax benefits as of July 31, 2018 and 2017 were $1,290 and $1,209, 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, 2018, 2017 and 2016 were $203, $(218) and $(231), 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, |
|  | 2018 |  |  | 2017 |
Unrecognized tax benefits |  | $ | 13,004 |  |  | $ | 12,671 |
Reduction to unrecognized tax benefits for tax credit carry forward |  |  | (955) |  |  |  | (1,882) |
Accrued interest and penalties |  |  | 1,290 |  |  |  | 1,209 |
Total unrecognized tax benefits |  | $ | 13,339 |  |  | $ | 11,998 |
Short-term, included in “Income and other taxes” |  | $ | 893 |  |  | $ | 1,735 |
Long-term |  |  | 12,446 |  |  |  | 10,263 |
Total unrecognized tax benefits |  | $ | 13,339 |  |  | $ | 11,998 |
The Company anticipates a decrease of approximately $2,300 in unrecognized tax benefits and $450 in interest during fiscal 2019 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 2015-2017 remain open for federal income tax purposes and fiscal years 2013-2017 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 recently completed an exam by the state of Indiana for the years ended July 31, 2013 through 2015. A formal protest has been submitted in response to the exam. The Company believes it has adequately reserved for its exposure to additional payments for uncertain tax positions related to its State of 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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