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, 2013

Components of deferred tax assets and liabilities

The components of deferred tax assets and liabilities are as follows:



	May 31,
In millions	2013			2012
Deferred tax assets:
Compensation and employee benefit liabilities	$	16.3		$	15.8
Other current liabilities	6.3			6.7
Tax credit carry forward	35.3			31.7
Depreciation	8.5			8.0
Stock-based compensation	24.6			28.5
Other	16.6			17.4
Gross deferred tax assets	107.6			108.1
Deferred tax liabilities:
Capitalized software	45.8			39.3
Depreciation	20.2			21.8
Intangible assets	41.0			36.8
Revenue not subject to current taxes	11.7			11.1
Unrealized gains on available-for-sale securities	13.3			21.8
Other	0.6			1.0
Gross deferred tax liabilities	132.6			131.8
Net deferred tax liability	$	(25.0	)	$	(23.7	)

Components of provision for income taxes

The components of the provision for income taxes are as follows:



	Year ended May 31,
In millions	2013			2012		2011
Current:
Federal	$	274.2		$	259.8	$	234.0
State	62.9			40.8		29.3
Total current	337.1			300.6		263.3
Deferred:
Federal	5.5			9.3		12.0
State	(0.2		)	2.4		1.6
Total deferred	5.3			11.7		13.6
Provision for income taxes	$	342.4		$	312.3	$	276.9

Reconciliation of U.S. federal statutory tax rate

A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:



	Year ended May 31,
	2013		2012		2011
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Increase/(decrease) resulting from:
State income taxes, net of federal tax benefit	3.0	%	3.3	%	2.5	%
Tax settlement	1.5	%	—	%	—	%
Tax-exempt municipal bond interest	(1.7	)%	(1.8	)%	(2.2	)%
Other items	(0.2	)%	(0.2	)%	(0.3	)%
Effective income tax rate	37.6	%	36.3	%	35.0	%

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

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:



	Year ended May 31,
In millions	2013			2012			2011
Balance as of beginning of fiscal year	$	41.7		$	41.2		$	35.8
Additions for tax positions of the current year	28.5			0.4			6.0
Additions for tax positions of prior years	12.2			1.3			0.1
Reductions for tax positions of prior years	(0.5		)	(0.1		)	(0.1		)
Settlements with tax authorities	(55.0		)	(0.7		)	—
Expiration of the statute of limitations	(0.2		)	(0.4		)	(0.6		)
Balance as of end of fiscal year	$	26.7		$	41.7		$	41.2