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Income Taxes | 12 Months Ended
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Aug. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income before income taxes consisted of the following (in thousands):
| Fiscal Year Ended August 31,
| 2023 |  | 2022 |  | 2021
United States | $ | 49,871 |  |  | $ | 47,427 |  |  | $ | 40,949 |
Foreign (1) | 35,292 |  |  | 36,681 |  |  | 45,550 |
Income before income taxes | $ | 85,163 |  |  | $ | 84,108 |  |  | $ | 86,499 |
(1)Included in these amounts are income before income taxes for the EMEA segment of $25.6 million, $30.3 million and $38.8 million for the fiscal years ended August 31, 2023, 2022 and 2021, respectively. The provision for income taxes consisted of the following (in thousands):
| Fiscal Year Ended August 31,
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 9,973 |  |  | $ | 7,487 |  |  | $ | 5,871 |
State | 1,039 |  |  | 861 |  |  | 1,007 |
Foreign | 9,023 |  |  | 8,114 |  |  | 10,944 |
Total current | 20,035 |  |  | 16,462 |  |  | 17,822 |
Deferred: |  |  |  |  |
United States | (806) |  |  | 6 |  |  | (1,201) |
Foreign | (59) |  |  | 311 |  |  | (351) |
Total deferred | (865) |  |  | 317 |  |  | (1,552) |
Provision for income taxes | $ | 19,170 |  |  | $ | 16,779 |  |  | $ | 16,270 |
Deferred tax assets and deferred tax liabilities consisted of the following (in thousands):
| August 31, 2023 |  | August 31, 2022
Deferred tax assets: |  |  |
Accrued payroll and related expenses | $ | 1,110 |  |  | $ | 881 |
Reserves and accruals | 1,436 |  |  | 1,178 |
Research and development expenses | 1,125 |  |  | - |
Stock-based compensation expense | 2,394 |  |  | 2,366 |
Uncertain tax positions and related interest | 991 |  |  | 560 |
Uniform capitalization | 2,383 |  |  | 2,657 |
Tax credit carryforwards | 3,918 |  |  | 3,512 |
Other | 2,673 |  |  | 2,630 |
Total gross deferred tax assets | 16,030 |  |  | 13,784 |
Valuation allowance | (3,960) |  |  | (3,628) |
Total net deferred tax assets | 12,070 |  |  | 10,156 |
Deferred tax liabilities: |  |  |
Property and equipment, net | (4,215) |  |  | (4,122) |
Amortization of tax goodwill and intangible assets | (15,415) |  |  | (14,931) |
Other | (1,544) |  |  | (952) |
Total deferred tax liabilities | (21,174) |  |  | (20,005) |
Net deferred tax liabilities | $ | (9,104) |  |  | $ | (9,849) |
The Company had state net operating loss (“NOL”) carryforwards of $5.3 million as of August 31, 2023 and 2022, which generated a net deferred tax asset of $0.4 million as of August 31, 2023 and 2022. The state NOL carryforwards, if unused, will expire between fiscal year 2024 and 2043. The Company also had tax credit carryforwards of $3.9 million and $3.5 million as of August 31, 2023 and 2022, respectively, of which $3.6 million and $3.3 million, respectively, is attributable to U.K. tax credit carryforwards, which do not expire. Future utilization of the U.K. tax credit carryforwards and certain state credit carryforwards is uncertain and is dependent upon several factors that may not occur, including the generation of future taxable income in certain jurisdictions. At this time, management cannot conclude that it is “more likely than not” that the related deferred tax assets will be realized. Accordingly, a valuation allowance has been recorded against the related deferred tax asset associated with the U.K. tax credit carryforwards and certain state carryforwards. A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows (in thousands):
| Fiscal Year Ended August 31,
| 2023 |  | 2022 |  | 2021
Amount computed at U.S. statutory federal tax rate | $ | 17,884 |  |  | $ | 17,662 |  |  | $ | 18,165 |
Effect of foreign operations | 1,583 |  |  | 317 |  |  | 629 |
Net benefit from GILTI/FDII | (2,071) |  |  | (2,002) |  |  | (1,764) |
Expense (benefit) from stock compensation | 538 |  |  | (204) |  |  | (1,813) |
Uncertain tax positions and related interest | 1,377 |  |  | 273 |  |  | 222 |
Other | (141) |  |  | 733 |  |  | 831 |
Provision for income taxes | $ | 19,170 |  |  | $ | 16,779 |  |  | $ | 16,270 |
The provision for income taxes was 22.5% and 19.9% of income before income taxes for the fiscal years ended August 31, 2023 and 2022, respectively. The increase in the effective income tax rate from period to period was primarily due to higher tax rates in certain foreign jurisdictions, as well as tax shortfalls from the settlements of stock-based equity awards and increases in interest expense related to uncertain tax positions. The increase was partially offset by a decrease in nondeductible performance-based compensation expense. Reconciliations of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):
| Fiscal Year Ended August 31,
| 2023 |  | 2022
Unrecognized tax benefits – beginning of fiscal year | $ | 9,251 |  |  | $ | 9,314 |
Net increases (decreases) – prior period tax positions | - |  |  | - |
Net increases – current period tax positions | 191 |  |  | 200 |
Expirations of statute of limitations for assessment | (167) |  |  | (263) |
Unrecognized tax benefits – end of fiscal year | $ | 9,275 |  |  | $ | 9,251 |
Gross unrecognized tax benefits totaled $9.3 million for the fiscal years ended August 31, 2023 and 2022 of which $9.1 million would affect the Company’s effective income tax rate if recognized. Interest and penalties related to uncertain tax positions included in tax expense was $1.8 million for fiscal year ending August 31, 2023 and $0.3 million for fiscal year ending August 31, 2022, primarily related to the toll tax liability reserve. The total balance of accrued interest and penalties related to uncertain tax positions was $3.4 million and $1.6 million for the fiscal years ended August 31, 2023 and 2022, respectively. Total unrecognized tax benefits including interest were $12.7 million and $10.9 million as of August 31, 2023 and 2022, respectively, and are recorded in other long-term liabilities in the Company’s consolidated balance sheets. The Company is subject to taxation in the U.S. and in various state and foreign jurisdictions. Due to expired statutes and closed audits, the Company’s federal income tax returns for years prior to fiscal year 2018 are not subject to examination by the U.S. Internal Revenue Service. The Company is currently under audit in various state jurisdictions for fiscal years 2018 through 2022. Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2019 are no longer subject to examination. The Company has estimated that up to $0.4 million of unrecognized tax benefits related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months. Audit outcomes and the timing of settlements are subject to significant uncertainty. Income taxes receivable of $1.1 million and $5.0 million are recorded in the Company’s consolidated balance sheets as of August 31, 2023 and 2022, respectively. Income taxes receivable are included in other current assets, which also consists of miscellaneous prepaid expenses and deposits.

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