Income Taxes

9 Months Ended

Feb. 28, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9 — INCOME TAXES

The effective income tax rate of 35.9% for the three months ended February 28, 2023 compares to the effective income tax rate of 17.9% for the three months ended February 28, 2022. The effective income tax rate of 25.9% for the nine months ended February 28, 2023 compares to the effective income tax rate of 23.9% for the nine months ended February 28, 2022.

The effective income tax rates for the three- and nine-month periods ended February 28, 2023 and 2022 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, partially offset by tax benefits related to equity compensation.

Further, the effective tax rates for the three- and nine-month periods ended February 28, 2023 reflect the unfavorable impact of a noncash impairment charge for goodwill that is nondeductible for tax purposes. Additionally, the effective tax rates for the three- and nine-month periods ended February 28, 2022 reflect net favorable changes in foreign tax credit valuation allowances.

Our deferred tax liability for unremitted foreign earnings was $0.7 million as of February 28, 2023, which represents our estimate of the net tax cost associated with the remittance of $202.5 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 February 28, 2023. 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.