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Income Taxes
 12 Months Ended
Aug. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes consisted of the following (in thousands):
Fiscal Year Ended August 31,
202420232022
United States$47,345 $49,871 $47,427 
Foreign (1)
44,163 35,292 36,681 
Income before income taxes$91,508 $85,163 $84,108 
(1)Included in these amounts are income before income taxes for the EIMEA segment of $31.4 million, $25.6 million and $30.3 million for the fiscal years ended August 31, 2024, 2023 and 2022, respectively.
The provision for income taxes consisted of the following (in thousands):
Fiscal Year Ended August 31,
202420232022
Current:
Federal$9,559 $9,973 $7,487 
State820 1,039 861 
Foreign12,596 9,023 8,114 
Total current22,975 20,035 16,462 
Deferred:
United States(1,413)(806)6 
Foreign302 (59)311 
Total deferred(1,111)(865)317 
Provision for income taxes$21,864 $19,170 $16,779 
Deferred tax assets and deferred tax liabilities consisted of the following (in thousands):
August 31,
2024		August 31,
2023
Deferred tax assets:
Accrued payroll and related expenses$1,321 $1,110 
Reserves and accruals2,166 1,436 
Research and development expenses1,520 1,125 
Stock-based compensation expense2,622 2,394 
Uncertain tax positions and related interest1,266 991 
Uniform capitalization1,774 2,383 
Tax credit carryforwards4,197 3,918 
Other2,673 2,673 
Total gross deferred tax assets17,539 16,030 
Valuation allowance(4,305)(3,960)
Total net deferred tax assets13,234 12,070 
Deferred tax liabilities:
Property and equipment, net(3,940)(4,215)
Amortization of tax goodwill and intangible assets(15,458)(15,415)
Other(1,909)(1,544)
Total deferred tax liabilities(21,307)(21,174)
Net deferred tax liabilities$(8,073)$(9,104)
The Company had state net operating loss (“NOL”) carryforwards of $6.3 million as of August 31, 2024, which generated a net deferred tax asset of $0.4 million. The state NOL carryforwards, if unused, will expire between fiscal years 2025 and 2044. The Company also had tax credit carryforwards of $4.2 million as of August 31, 2024, of which $4.1 million is attributable to U.K. tax credit carryforwards, which do not expire.
Future utilization of the U.K. tax credit carryforwards and certain state 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 does not conclude that it is “more likely than not” that all of the related deferred tax assets will be realized. Accordingly, the Company recorded a net increase in its valuation allowance of $0.3 million during the fiscal year ended August 31, 2024 which resulted in a cumulative valuation allowance recorded against the related deferred tax asset associated with the U.K. tax credit carryforwards of $3.9 million and certain state carryforwards of $0.4 million as of August 31, 2024.
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,
202420232022
Amount computed at U.S. statutory federal tax rate$19,217 $17,884 $17,662 
Effect of foreign operations3,339 1,583 317 
Net benefit from GILTI/FDII(2,696)(2,071)(2,002)
Uncertain tax positions and related interest947 1,377 273 
Other1,057 397 529 
Provision for income taxes$21,864 $19,170 $16,779 
The provision for income taxes was 23.9% and 22.5% of income before income taxes for the fiscal years ended August 31, 2024 and 2023, respectively. The increase in the effective income tax rate from period to period was primarily due to income taxed at higher tax rates in certain foreign jurisdictions from period to period.
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,
 20242023
Unrecognized tax benefits – beginning of fiscal year$9,275 $9,251 
Net increases – current period tax positions184 191 
Expirations of statute of limitations for assessment(312)(167)
Unrecognized tax benefits – end of fiscal year$9,147 $9,275 
Gross unrecognized tax benefits totaled $9.1 million and $9.3 million for the fiscal years ended August 31, 2024 and 2023, respectively, of which $9.0 million and $9.1 million, respectively, would affect the Company’s effective income tax rate if recognized. Interest and penalties related to uncertain tax positions included in tax expense was $1.2 million and $1.8 million for the fiscal years ended August 31, 2024 and 2023, respectively. The total balance of accrued interest and penalties related to uncertain tax positions was $4.6 million and $3.4 million for the fiscal years ended August 31, 2024 and 2023, respectively. Total unrecognized tax benefits including interest and penalties were $13.7 million and $12.7 million as of August 31, 2024 and 2023, 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 2021 through 2022. Generally, for the majority of state and foreign jurisdictions where the Company does business, periods prior to fiscal year 2020 are no longer subject to examination. The Company has estimated that up to $13.1 million of unrecognized tax benefits, including interest and penalties, related to income tax positions may be affected by the resolution of tax examinations or expiring statutes of limitation within the next twelve months. This includes $12.7 million of unrecognized tax benefits, including interest and penalties, associated with the Tax Cuts and Jobs Act’s mandatory one-time “toll tax” on unremitted foreign earnings. Audit outcomes and the timing of settlements are subject to significant uncertainty.
Income taxes receivable of $0.5 million and $1.1 million are recorded in the Company’s consolidated balance sheets as of August 31, 2024 and 2023, respectively. Income taxes receivable are included in other current assets, which also consists of miscellaneous prepaid expenses and deposits.