Income Taxes

3 Months Ended

Aug. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 7 — INCOME TAXES

The effective income tax rate of 24.8% for the three months ended August 31, 2022 compares to the effective income tax rate of 25.7% for the three months ended August 31, 2021. The effective income tax rates for the three-month periods ended August 31, 2022 and 2021 reflect variances from the 21% statutory rate due primarily to the unfavorable impact of state and local income taxes, non-deductible business expenses, and the net tax on foreign subsidiary income resulting from the global intangible low-taxed income provisions. Additionally, the effective income tax rate for the three-month period ended August 31, 2022 reflects an incremental favorable period-over-period tax benefit associated with equity compensation.

Our deferred tax liability for unremitted foreign earnings was $1.4 million as of August 31, 2022, which represents our estimate of the net tax cost associated with the remittance of $196.5 million of foreign earnings that are not considered to be permanently reinvested. We have not provided for foreign withholding or income taxes on the remaining foreign subsidiaries’ undistributed earnings because such earnings have been retained and reinvested by the subsidiaries as of August 31, 2022. Accordingly, no provision has been made for foreign withholding or income taxes, which may become payable if the remaining undistributed earnings of foreign subsidiaries were remitted to us as dividends.

On August 16, 2022, Public Law No: 117-169, also known as the Inflation Reduction Act of 2022 ("IRA"), was signed into law. Included in the IRA, amongst other income tax provisions, is a new 15% corporate alternative minimum tax imposed on certain large corporations. Currently, we do not believe that this new minimum tax or the other income tax provisions of the IRA will have a material impact on our consolidated financial statements.