Paychex, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

Income Taxes (Tables)

12 Months Ended

May 31, 2012

Components of deferred tax assets and liabilities


	May 31,
In millions	2012			2011
Deferred tax assets:
Compensation and employee benefit liabilities		15.8			16.3
Other current liabilities		6.7			9.4
Tax credit carry forward		31.7			27.4
Depreciation		8.0			6.7
Stock-based compensation		28.5			29.8
Other		17.4			18.2

Gross deferred tax assets		108.1			107.8
Deferred tax liabilities:
Capitalized software		39.3			33.2
Depreciation		21.8			16.6
Intangible assets		36.8			32.5
Revenue not subject to current taxes		11.1			10.0
Unrealized gains on available-for-sale securities		21.8			21.7
Other		1.0			0.5

Gross deferred tax liabilities		131.8			114.5

Net deferred tax liability	$	(23.7	)	$	(6.7	)

Components of provision for income taxes


	Year ended May 31,
In millions	2012		2011		2010
Current:
Federal	$	259.8	$	234.0	$	230.2
State		40.8		29.3		26.0

Total current		300.6		263.3		256.2

Deferred:
Federal		9.3		12.0		(3.9	)
State		2.4		1.6		—

Total deferred		11.7		13.6		(3.9	)

Provision for income taxes	$	312.3	$	276.9	$	252.3

Reconciliation of the U.S. federal statutory tax rate


	Year ended May 31,
	2012			2011			2010
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
Increase/(decrease) resulting from:
State income taxes, net of federal tax benefit		3.3			2.5			2.3
Tax-exempt municipal bond interest		(1.8	)		(2.2	)		(2.7	)
Other items		(0.2	)		(0.3	)		—

Effective income tax rate		36.3	%		35.0	%		34.6	%

Reconciliation of gross unrecognized tax benefits, not including interest or potential offsetting effects


	Year ended May 31,
In millions	2012			2011			2010
Balance as of beginning of fiscal year	$	41.2		$	35.8		$	35.8
Additions for tax positions of the current year		0.4			6.0			0.5
Additions for tax positions of prior years		1.3			0.1			—
Reductions for tax positions of prior years		(0.1	)		(0.1	)		—
Settlements with tax authorities		(0.7	)		—			—
Expiration of the statute of limitations		(0.4	)		(0.6	)		(0.5	)

Balance as of end of fiscal year	$	41.7		$	41.2		$	35.8

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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