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Income Taxes | 12 Months Ended
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Jul. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income before income taxes and losses of unconsolidated affiliate consists of the following:
|  | Years Ended July 31,
|  | 2021 |  | 2020 |  | 2019
United States |  | $ | 59,504 |  |  | $ | 69,433 |  |  | $ | 55,077 |
Other Nations |  | 111,519 |  |  | 71,503 |  |  | 109,567 |
Total |  | $ | 171,023 |  |  | $ | 140,936 |  |  | $ | 164,644 |
The increase in income before income taxes and losses of unconsolidated affiliate in Other Nations to $111,519 in fiscal 2021 from $71,503 in fiscal 2020 was primarily due to intercompany royalty transactions that occurred in fiscal 2020 which reduced Other Nations income before income taxes and losses of unconsolidated affiliate by $22,914. In addition, profitability improved in Other Nations in fiscal 2021 compared to fiscal 2020 as our global businesses continue to recover from the COVID-19 pandemic. The decrease in income before income taxes and losses of unconsolidated affiliate to $71,503 in fiscal 2020 from $109,567 in fiscal 2019 was primarily due to intercompany royalty transactions that occurred in fiscal 2020 which which reduced Other Nations income before income taxes and losses of unconsolidated affiliate by $22,914. In addition, profitability decreased in Other Nations in fiscal 2020 compared to fiscal 2019 as our global businesses were impacted by reduced economic activity resulting from the COVID-19 pandemic. Income tax expense consists of the following:
|  | Years Ended July 31,
|  | 2021 |  | 2020 |  | 2019
Current income tax expense: |  |  |  |  |  |
United States |  | $ | 16,322 |  |  | $ | 3,031 |  |  | $ | 2,232 |
Other Nations |  | 26,141 |  |  | 25,133 |  |  | 22,445 |
States (U.S.) |  | 2,112 |  |  | 1,160 |  |  | 913 |
|  | $ | 44,575 |  |  | $ | 29,324 |  |  | $ | 25,590 |
Deferred income tax (benefit) expense: |  |  |  |  |  |
United States |  | $ | (2,662) |  |  | $ | 1,072 |  |  | $ | 8,451 |
Other Nations |  | (5,938) |  |  | (2,065) |  |  | (667) |
States (U.S.) |  | (365) |  |  | (10) |  |  | 12 |
|  | $ | (8,965) |  |  | $ | (1,003) |  |  | $ | 7,796 |
Total income tax expense |  | $ | 35,610 |  |  | $ | 28,321 |  |  | $ | 33,386 |
The tax effects of temporary differences are as follows as of July 31, 2021 and 2020:
|  | July 31, 2021
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 5,143 |  |  | $ | (51) |  |  | $ | 5,092 |
Employee compensation and benefits |  | 8,570 |  |  | — |  |  | 8,570 |
Accounts receivable |  | 1,433 |  |  | — |  |  | 1,433 |
Fixed assets |  | 3,479 |  |  | (7,292) |  |  | (3,813) |
Intangible assets |  | 996 |  |  | (51,987) |  |  | (50,991) |
Deferred and equity-based compensation |  | 8,069 |  |  | — |  |  | 8,069 |
Postretirement benefits |  | 2,359 |  |  | (166) |  |  | 2,193 |
Tax credit and net operating loss carry-forwards |  | 60,238 |  |  | — |  |  | 60,238 |
Valuation allowances |  | (51,069) |  |  | — |  |  | (51,069) |
Other, net |  | 13,698 |  |  | (5,282) |  |  | 8,416 |
Total |  | $ | 52,916 |  |  | $ | (64,778) |  |  | $ | (11,862) |
|  | July 31, 2020
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 4,385 |  |  | $ | (58) |  |  | $ | 4,327 |
Employee compensation and benefits |  | 3,339 |  |  | (72) |  |  | 3,267 |
Accounts receivable |  | 1,518 |  |  | — |  |  | 1,518 |
Fixed assets |  | 3,663 |  |  | (7,285) |  |  | (3,622) |
Intangible assets |  | 1,026 |  |  | (31,488) |  |  | (30,462) |
Deferred and equity-based compensation |  | 7,851 |  |  | — |  |  | 7,851 |
Postretirement benefits |  | 3,002 |  |  | (31) |  |  | 2,971 |
Tax credit and net operating loss carry-forwards |  | 56,447 |  |  | — |  |  | 56,447 |
Valuation allowances |  | (58,809) |  |  | — |  |  | (58,809) |
Other, net |  | 11,786 |  |  | (4,715) |  |  | 7,071 |
Total |  | $ | 34,208 |  |  | $ | (43,649) |  |  | $ | (9,441) |
Tax credit carry-forwards as of July 31, 2021 consist of the following: •Foreign net operating loss carry-forwards of $102,847, of which $90,475 have no expiration date and the remainder of which expire from 2022 to 2038. •State net operating loss carry-forwards of $23,164, which expire in 2032. •Foreign tax credit carry-forwards of $22,141, which expire from 2022 to 2031. •State R&D credit carry-forwards of $11,481, which expire from 2022 to 2036. Rate Reconciliation A reconciliation of the income tax rate computed by applying the statutory U.S. federal income tax rate to income before income taxes and losses of unconsolidated affiliate to the total income tax expense is as follows:
|  | Years Ended July 31,
|  | 2021 |  | 2020 |  | 2019
Tax at statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
International rate differential(1) |  | 2.3 | % |  | 5.1 | % |  | 2.0 | %
Adjustments to tax accruals and reserves(2) |  | 3.3 | % |  | (2.0) | % |  | (3.6) | %
Research and development tax credits and domestic manufacturer’s deduction |  | (1.6) | % |  | (2.0) | % |  | (1.6) | %
Valuation allowance against foreign net operating loss carry-forwards(3) |  | (4.8) | % |  | — | % |  | 0.2 | %
Deferred tax and other adjustments, net |  | 0.6 | % |  | (2.0) | % |  | 2.3 | %
Income tax rate |  | 20.8 | % |  | 20.1 | % |  | 20.3 | %
(1)Represents the foreign income tax rate differential when compared to the U.S. statutory income tax rate for the years ended July 31, 2021, 2020, and 2019. (2)The years ended July 31, 2021, 2020, and 2019, include reductions of uncertain tax positions resulting from the closure of audits and lapses in statues of limitations. The year ended July 31, 2021 was impacted by the recording of reserves for uncertain tax provisions. (3)The year ended July 31, 2021 includes a reduction in a previously recorded valuation allowance against certain foreign net operating loss carry-forwards. Uncertain Tax Positions The Company follows the guidance in ASC 740, "Income Taxes" regarding uncertain tax positions. The guidance requires application of a more-likely-than-not threshold to the recognition and de-recognition of income tax positions. A reconciliation of unrecognized tax benefits (excluding interest and penalties) is as follows:
Balance as of July 31, 2018 | $ | 20,430 |
Additions based on tax positions related to the current year | 2,518 |
Additions for tax positions of prior years | 612 |
Reductions for tax positions of prior years | (378) |
Lapse of statute of limitations | (8,140) |
Cumulative translation adjustments and other | (201) |
Balance as of July 31, 2019 | $ | 14,841 |
Additions based on tax positions related to the current year | 2,798 |
Additions for tax positions of prior years | 1,295 |
Reductions for tax positions of prior years | (5,087) |
Lapse of statute of limitations | (117) |
Cumulative translation adjustments and other | (108) |
Balance as of July 31, 2020 | $ | 13,622 |
Additions based on tax positions related to the current year | 4,664 |
Additions for tax positions of prior years(1) | 3,940 |
Reductions for tax positions of prior years | (365) |
Lapse of statute of limitations | (159) |
Cumulative translation adjustments and other | 210 |
Balance as of July 31, 2021 | $ | 21,912 |
(1)Includes acquisitions. Of the $21,912 of unrecognized tax benefits, if recognized, $18,717 would affect the Company's income tax rate. The Company has classified $15,427 and $8,931, excluding interest and penalties, of the reserve for uncertain tax positions in "Other liabilities" on the Consolidated Balance Sheets as of July 31, 2021 and 2020, respectively. The Company has classified $6,485 and $4,691, excluding interest and penalties, as a reduction of long-term deferred income tax assets on the accompanying Consolidated Balance Sheets as of July 31, 2021 and 2020, respectively. Interest expense is recognized on the amount of potentially underpaid taxes associated with the Company's tax positions, beginning in the first period in which interest starts accruing under the respective tax law and continuing until the tax positions are settled. The Company recognized interest (expense) and benefits of ($596), $372, and $1,013 on the reserve for uncertain tax positions during the years ended July 31, 2021, 2020, and 2019, respectively. The Company also recognized (expenses) and benefits related to penalties of ($595), $96, and $2,357 during the years ended July 31, 2021, 2020, and 2019, respectively. These amounts are net of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2021 and 2020, the Company had $2,297 and $1,354, respectively, accrued for interest on unrecognized tax benefits. Penalties are accrued if the tax position does not meet the minimum statutory threshold to avoid the payment of a penalty. At July 31, 2021 and 2020, the Company had $2,098 and $658, respectively, accrued for penalties on unrecognized tax benefits. Interest expense and penalties are recorded as a component of "Income tax expense" in the Consolidated Statements of Income. The Company estimates that it is reasonably possible that the unrecognized tax benefits may be reduced by $3,253 during the year ending July 31, 2022 as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or the expiration of statute of limitations, all of which, if recognized, would result in an income tax benefit in the Consolidated Statements of Income. During the year ended July 31, 2021, the Company recognized $295 of tax benefits (including interest and penalties) associated with the lapse of statutes of limitations. The Company and its subsidiaries file income tax returns in the U.S., various states, and foreign jurisdictions. The following table summarizes the open tax years for the Company's major jurisdictions:
Jurisdiction |  | Open Tax Years
United States — Federal |  | F’19 — F’21

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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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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