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, 2015

Components of deferred tax assets and liabilities

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



	May 31,
In millions	2015			2014
Deferred tax assets:
Compensation and employee benefit liabilities	$	20.9		$	18.7
Other current liabilities	6.9			6.9
Tax credit carry forward	40.1			38.3
Depreciation	11.9			8.3
Stock-based compensation	21.6			21.1
Other	24.9			28.7
Gross deferred tax assets	126.3			122.0
Deferred tax liabilities:
Capitalized software	53.6			50.1
Depreciation	3.8			12.2
Goodwill and Intangible assets	52.0			46.7
Revenue not subject to current taxes	13.1			12.6
Unrealized gains on available-for-sale securities	5.3			13.2
Other	0.3			0.4
Gross deferred tax liabilities	128.1			135.2
Net deferred tax liability	$	(1.8	)	$	(13.2	)

Components of provision for income taxes

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



	Year ended May 31,
In millions	2015			2014			2013
Current:
Federal	$	341.4		$	314.5		$	274.2
State	47.8			51.0			62.9
Total current	389.2			365.5			337.1
Deferred:
Federal	(5.1		)	(3.5		)	5.5
State	1.0			(1.4		)	(0.2		)
Total deferred	(4.1		)	(4.9		)	5.3
Income taxes	$	385.1		$	360.6		$	342.4

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,
	2015		2014		2013
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	%	3.0	%
Tax settlement	—	%	—	%	1.5	%
Tax-exempt municipal bond interest	(1.5	)%	(1.5	)%	(1.7	)%
Other items	(0.2	)%	(0.3	)%	(0.2	)%
Effective income tax rate	36.3	%	36.5	%	37.6	%

Reconciliation of gross unrecognized tax benefits, not including interest or other 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	2015			2014			2013
Balance as of beginning of fiscal year	$	40.0		$	26.7		$	41.7
Additions for tax positions of the current year	6.7			11.2			28.5
Additions for tax positions of prior years	0.8			4.2			12.2
Reductions for tax positions of prior years	(0.4		)	(1.8		)	(0.5		)
Settlements with tax authorities	(1.2		)	—			(55.0		)
Expiration of the statute of limitations	(6.0		)	(0.3		)	(0.2		)
Balance as of end of fiscal year	$	39.9		$	40.0		$	26.7