Income Taxes

6 Months Ended

Nov. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 7 — INCOME TAXES

The effective income tax rate of 25.5% for the three months ended November 30, 2023 compares to the effective income tax rate of 24.9% for the three months ended November 30, 2022. The effective income tax rates for the three-month periods ended November 30, 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.

The effective income tax rate of 25.3% for the six months ended November 30, 2023 compares to the effective income tax rate of 24.8% for the six months ended November 30, 2022. The effective income tax rates for the six-month periods ended November 30, 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. Additionally, the effective tax rate for the six-month period ended November 30, 2023 reflects incremental tax expense related to increases to our net deferred income tax liability for unremitted earnings and our liability for uncertain tax positions, partially offset by favorable adjustments for U.S. foreign tax credits.

Our deferred tax liability for unremitted foreign earnings was $5.4 million as of November 30, 2023, which represents our estimate of the net tax cost associated with the remittance of $290.3 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 November 30, 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.