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Income Taxes | 12 Months Ended
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May 31, 2022
Income Taxes | 6. Income Taxes Income before income taxes by source consists of the following amounts:
|  | Year ended May 31 |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
U.S. |  | $ | 38,554 |  |  | $ | 55,753 |  |  | $ | 62,329 |
Foreign |  |  | 21,653 |  |  |  | 19,515 |  |  |  | 9,976 |
|  | $ | 60,207 |  |  | $ | 75,268 |  |  | $ | 72,305 |
The provision for income taxes consists of the following:
|  | Year ended May 31 |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8,579 |  |  | $ | 6,981 |  |  | $ | 6,886 |
Change in tax-related uncertainties |  |  | 3 |  |  |  | (75 | ) |  |  | 269 |
State |  |  | 2,406 |  |  |  | 2,147 |  |  |  | 1,262 |
Foreign |  |  | 5,140 |  |  |  | 4,875 |  |  |  | 2,475 |
Total Current |  |  | 16,128 |  |  |  | 13,928 |  |  |  | 10,892 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3,721 | ) |  |  | 479 |  |  |  | 1,964 |
State |  |  | (356 | ) |  |  | 44 |  |  |  | 195 |
Foreign |  |  | (151 | ) |  |  | (65 | ) |  |  | (221 | )
Total Deferred |  |  | (4,228 | ) |  |  | 458 |  |  |  | 1,938 |
Provision for Income Taxes |  | $ | 11,900 |  |  | $ | 14,386 |  |  | $ | 12,830 |
The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows:
|  | Year ended May 31 |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Tax at U.S. statutory rate |  | $ | 12,643 |  |  | $ | 15,806 |  |  | $ | 15,184 |
Permanent differences |  |  | 67 |  |  |  | 292 |  |  |  | 360 |
Global intangible low-taxed income (GILTI) |  |  | 1,501 |  |  |  | 2,064 |  |  |  | 438 |
Foreign derived intangible income deduction (FDII) |  |  | (1,308 | ) |  |  | (1,210 | ) |  |  | (1,120 | )
Foreign rate differential |  |  | 215 |  |  |  | 669 |  |  |  | (182 | )
Subpart F income |  |  | 397 |  |  |  | 628 |  |  |  | 634 |
Tax benefits on stock-based compensation |  |  | (462 | ) |  |  | (2,651 | ) |  |  | (1,998 | )
Provision for state income taxes, net of federal benefit |  |  | 1,517 |  |  |  | 1,601 |  |  |  | 1,412 |
Tax Credits |  |  | (2,527 | ) |  |  | (3,298 | ) |  |  | (1,417 | )
Impact of tax rate changes |  |  | 583 |  |  |  | — |  |  |  | — |
Other |  |  | (726 | ) |  |  | 485 |  |  |  | (481 | )
Income Tax Expense |  | $ | 11,900 |  |  | $ | 14,386 |  |  | $ | 12,830 |
Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $1,747,000, $2,753,000 and $945,000 in fiscal years 2022, 2021 and 2020, respectively. The Company’s research and development credits were $780,000, $545,000 and $472,000 in fiscal years 2022, 2021 and 2020, respectively. Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred income tax liabilities and assets are as follows:
|  | Year ended May 31 |
( i n thousands) |  | 2022 |  |  | 2021 |
Deferred income tax liabilities |  |  |  |  |  |  |  |
Indefinite and long-lived assets |  | $ | (22,709 | ) |  | $ | (25,072 | )
Right of use asset |  |  | (344 | ) |  |  | (213 | )
Prepaid expenses |  |  | (884 | ) |  |  | (721 | )
|  |  | (23,937 | ) |  |  | (26,006 | )
Deferred income tax assets |  |  |  |  |  |  |  |
Stock options |  |  | 2,085 |  |  |  | 1,106 |
Inventories and accounts receivable |  |  | 2,044 |  |  |  | 2,081 |
Tax loss carryforwards |  |  | 561 |  |  |  | 662 |
Lease liability |  |  | 382 |  |  |  | 211 |
Accrued expenses and other |  |  | 2,422 |  |  |  | 570 |
Valuation allowance |  |  | (568 | ) |  |  | (541 | )
|  |  | 6,926 |  |  |  | 4,089 |
Net deferred income tax liabilities |  | $ | (17,011 | ) |  | $ | (21,917 | )
The Company has the following net operating loss carryforwards:
( i n thousands) |  | As of May 31, 2022 |  |  | Expiry
U.S. |  | $ | 281 |  |  | 2037
Foreign |  |  | 2,831 |  |  | 2024 to 2032
|  | $ | 3,112 |  |  |
Valuation allowances against certain deferred tax assets are established based on management’s determination of a more likely than not standard that the tax benefits will not be realized. We are subject to income taxes in the U.S. (federal and state) and in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. The Company’s policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties included in the unrecognized tax benefits reserve was $69,321 at May 31, 2022 and $64,518 at May 31, 2021. Of the total unrecognized tax benefits at May 31, 2022 and May 31, 2021, $808,186 and $805,316 respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate. The reconciliation of our unrecognized tax benefits is as follows:
|  | Year ended May 31 |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Beginning balance |  | $ | 764 |  |  | $ | 762 |  |  | $ | 541 |
Increase/(decrease) related to prior periods |  |  | (75 | ) |  |  | (182 | ) |  |  | 48 |
Increase related to current period |  |  | 147 |  |  |  | 184 |  |  |  | 173 |
Lapses of applicable statute of limitations |  |  | (95 | ) |  |  | — |  |  |  | — |
Ending balance |  | $ | 741 |  |  | $ | 764 |  |  | $ | 762 |
The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 201 8 and preceding years.

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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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