|12 Months Ended|
May 31, 2021
|Income Taxes [Abstract]|
Note L — Income Taxes
The components of deferred tax assets and liabilities are as follows:
The deferred tax asset related to NOL carry forward is comprised of $2.2 million of federal NOL carry forwards and $5.4 million of state NOL carry forwards. The federal NOL carry forwards were acquired through various acquisitions and expire between the fiscal years ending May 31, 2022 and May 31, 2037. The state NOL carry forwards expire between the fiscal years ending May 31, 2022 through May 31, 2040.
The components of the provision for income taxes are as follows:
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:
The effective income tax rates in all periods were impacted by recognition of net discrete tax benefits related to employee stock-based compensation payments. In fiscal 2019, the effective income tax rate included discrete tax expense for changes in tax reserves and the revaluation of deferred tax balances for legislative updates.
Uncertain income tax positions: The Company is subject to U.S. federal income tax, numerous local and state tax jurisdictions within the U.S., and taxes in Europe. The Company maintains a reserve for uncertain tax positions. As of May 31, 2021 and May 31, 2020, the total reserve for uncertain tax positions, including interest and net of federal benefits, was $20.4 million and $26.5 million, respectively, and was included in long-term liabilities on the Consolidated Balance Sheets.
A reconciliation of the beginning and ending amounts of the Company’s gross unrecognized tax benefits, not including interest or other potential offsetting effects, is as follows:
The reserve as of May 31, 2021 substantially relates to the Company’s uncertain tax positions for certain state income tax matters. The Company believes the reserve for uncertain tax positions, including interest and net of federal benefits, of $20.4 million as of May 31, 2021 adequately covers open tax years and uncertain tax positions up to and including fiscal 2021 for major taxing jurisdictions. As of May 31, 2021 and May 31, 2020, the entire $20.4 million and $26.5 million, respectively, of unrecognized tax benefits, including interest and net of federal benefit, if recognized, would impact the Company’s effective income tax rate.
The Company has concluded all U.S. federal income tax matters through fiscal 2017. With limited exception, state income tax audits by taxing authorities are closed through fiscal 2014, primarily due to expiration of the statute of limitations.The Company continues to follow its policy of recognizing interest and penalties accrued on tax positions as a component of income taxes on the Consolidated Statements of Income and Comprehensive Income. The amount of accrued interest and penalties associated with the Company’s tax positions is immaterial to the Consolidated Balance Sheets. The amount of interest and penalties recognized for fiscal years 2021, 2020, and 2019 was immaterial to the Company’s results of operations.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef