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Income Taxes | 12 Months Ended
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Jul. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before income taxes and losses of unconsolidated affiliate consists of the following:
|  | Years Ended July 31,
|  | 2022 |  | 2021 |  | 2020
United States |  | $ | 92,985 |  |  | $ | 59,504 |  |  | $ | 69,433 |
Other Nations |  | 98,995 |  |  | 111,519 |  |  | 71,503 |
Total |  | $ | 191,980 |  |  | $ | 171,023 |  |  | $ | 140,936 |
The decrease in income before income taxes and losses of unconsolidated affiliate in Other Nations to $98,995 in fiscal 2022 from $111,519 in fiscal 2021 was primarily due to intercompany royalty payments to the United States that occurred in fiscal 2022 which reduced Other Nations income before income taxes and losses of unconsolidated affiliate by $32,857. This was partially offset by improved profitability in Other Nations in fiscal 2022 compared to fiscal 2021. 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 payments to the United States 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 continued to recover from the COVID-19 pandemic. Income tax expense consists of the following:
|  | Years Ended July 31,
|  | 2022 |  | 2021 |  | 2020
Current income tax expense: |  |  |  |  |  |
United States |  | $ | 8,639 |  |  | $ | 16,322 |  |  | $ | 3,031 |
Other Nations |  | 31,851 |  |  | 26,141 |  |  | 25,133 |
States (U.S.) |  | 3,156 |  |  | 2,112 |  |  | 1,160 |
|  | $ | 43,646 |  |  | $ | 44,575 |  |  | $ | 29,324 |
Deferred income tax (benefit) expense: |  |  |  |  |  |
United States |  | $ | 970 |  |  | $ | (2,662) |  |  | $ | 1,072 |
Other Nations |  | (2,377) |  |  | (5,938) |  |  | (2,065) |
States (U.S.) |  | (238) |  |  | (365) |  |  | (10) |
|  | $ | (1,645) |  |  | $ | (8,965) |  |  | $ | (1,003) |
Total income tax expense |  | $ | 42,001 |  |  | $ | 35,610 |  |  | $ | 28,321 |
The tax effects of temporary differences are as follows as of July 31, 2022 and 2021:
|  | July 31, 2022
|  | Assets |  | Liabilities |  | Total
Inventories |  | $ | 8,112 |  |  | $ | (54) |  |  | $ | 8,058 |
Employee compensation and benefits |  | 8,146 |  |  | — |  |  | 8,146 |
Accounts receivable |  | 2,105 |  |  | — |  |  | 2,105 |
Fixed assets |  | 3,177 |  |  | (9,618) |  |  | (6,441) |
Intangible assets |  | 859 |  |  | (50,095) |  |  | (49,236) |
Deferred and equity-based compensation |  | 9,221 |  |  | — |  |  | 9,221 |
Postretirement benefits |  | 2,301 |  |  | — |  |  | 2,301 |
Tax credit and net operating loss carry-forwards |  | 49,006 |  |  | — |  |  | 49,006 |
Valuation allowances |  | (47,276) |  |  | — |  |  | (47,276) |
Other, net |  | 17,919 |  |  | (5,226) |  |  | 12,693 |
Total |  | $ | 53,570 |  |  | $ | (64,993) |  |  | $ | (11,423) |
|  | 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) |
Tax credit carry-forwards as of July 31, 2022 consist of the following: •Foreign net operating loss carry-forwards of $90,331, of which $76,295 have no expiration date and the remainder of which expire from fiscal 2023 to fiscal 2039. •State net operating loss carry-forwards of $22,629, of which $205 have no expiration date and the remainder of which expire in fiscal 2032. •Foreign tax credit carry-forwards of $18,501, which expire from fiscal 2024 to fiscal 2031. •State R&D credit carry-forwards of $11,066, which expire from fiscal 2023 to fiscal 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,
|  | 2022 |  | 2021 |  | 2020
Tax at statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
International rate differential (1) |  | 4.2 | % |  | 2.3 | % |  | 5.1 | %
Adjustments to tax accruals and reserves |  | (0.1) | % |  | 3.3 | % |  | (2.0) | %
Research and development tax credits |  | (1.6) | % |  | (1.6) | % |  | (2.0) | %
Valuation allowance against foreign tax credits and foreign net operating loss carry-forwards |  | (1.2) | % |  | (4.8) | % |  | — | %
Deferred tax and other adjustments, net |  | (0.4) | % |  | 0.6 | % |  | (2.0) | %
Income tax rate |  | 21.9 | % |  | 20.8 | % |  | 20.1 | %
(1)Represents the foreign income tax rate differential when compared to the U.S. statutory income tax rate for the years ended July 31, 2022, 2021, and 2020. 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, 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 |
Additions based on tax positions related to the current year | 3,233 |
Additions for tax positions of prior years | 435 |
Reductions for tax positions of prior years | (122) |
Lapse of statute of limitations | (3,226) |
Settlements with tax authorities | (1,129) |
Cumulative translation adjustments and other | (539) |
Balance as of July 31, 2022 | $ | 20,564 |
(1)Includes acquisitions. Of the $20,564 of unrecognized tax benefits, if recognized, $17,821 would affect the Company's income tax rate. The Company has classified $17,689 and $15,427, excluding interest and penalties, of the reserve for uncertain tax positions in "Other liabilities" on the Consolidated Balance Sheets as of July 31, 2022 and 2021, respectively. The Company has classified $2,875 and $6,485, excluding interest and penalties, as a reduction of long-term deferred income tax assets on the accompanying Consolidated Balance Sheets as of July 31, 2022 and 2021, 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 ($701), ($596), and $372 on the reserve for uncertain tax positions during the years ended July 31, 2022, 2021, and 2020, respectively. The Company also recognized benefits and (expenses) related to penalties of $82, $(595), and $96 during the years ended July 31, 2022, 2021, and 2020, respectively. These amounts are net of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2022 and 2021, the Company had $2,878 and $2,297, 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, 2022 and 2021, the Company had $1,925 and $2,098, 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 $3,945 during the year ending July 31, 2023 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, 2022, the Company recognized $4,106 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’22

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