Income Tax (Tables)

12 Months Ended

May 31, 2014

Schedule of Components of Income Tax Expense (Benefit)

The provision for income taxes for the fiscal years ended May 31, 2014, 2013 and 2012 consisted of the following:



	2014			2013			2012
	(in thousands)
Current tax expense:
Federal	$	49,178		$	16,326		$	52,875
State	3,856			987			2,989
Foreign	48,074			36,020			35,029
	101,108			53,333			90,893
Deferred tax expense (benefit):
Federal	1,568			26,302			(21,088		)
State	1,206			3,568			(813		)
Foreign	3,515			12,368			13,889
	6,289			42,238			(8,012		)
Provision for income taxes	107,398			95,571			82,881
Tax allocated to noncontrolling interests in a taxable entity	(5,230		)	(4,178		)	(6,604		)
Net income tax expense attributable to Global Payments	$	102,168		$	91,393		$	76,277

Schedule of Income before Income Tax, Domestic and Foreign

The following presents our income before income taxes for the fiscal years ended May 31, 2014, 2013 and 2012:



	2014		2013		2012
	(in thousands)
Income before income taxes - U.S.	$	153,453	$	137,501	$	103,163
Income before income taxes - foreign	223,897		196,783		197,284
Income before income taxes	$	377,350	$	334,284	$	300,447

Schedule of Effective Income Tax Rate Reconciliation

Our effective tax rates, as applied to income before income taxes for the years ended May 31, 2014, 2013 and 2012, respectively, differ from federal statutory rates as follows:



	2014		2013		2012
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	0.9		0.9		0.5
Foreign income taxes	(7.2	)	(7.0	)	(6.3	)
Foreign interest income not subject to tax	(2.1	)	(2.8	)	(2.2	)
Tax credits and other	3.1		3.7		1.8
Effective tax rate attributable to Global Payments	29.7	%	29.8	%	28.8	%
Noncontrolling interests	(1.2	)	(1.2	)	(1.2	)
Effective tax rate	28.5	%	28.6	%	27.6	%

Schedule of Deferred Tax Assets and Liabilities

As of May 31, 2014 and 2013, principal components of deferred tax items were as follows:



	2014			2013
	(in thousands)
Deferred tax assets:
Share-based compensation	$	5,916		$	12,266
Bad debt expense	2,802			2,292
Foreign NOL carryforward	6,881			8,221
U.S. NOL carryforward	22,074			243
U.S. capital loss carryforward	1,734			20,176
Basis difference - U.K. business	96,720			90,678
Foreign tax credit	11,819			14,413
Other tax credits	1,730			1,733
	149,676			150,022
Less: valuation allowance	(7,199		)	(28,464		)
Net deferred tax asset	142,477			121,558

Deferred tax liabilities:
Taxes on unremitted earnings and other	5,470			13,729
Foreign currency translation	26,813			30,163
Acquired intangibles	149,440			90,205
Prepaid expenses	1,800			2,523
Property and equipment	53,238			53,998
	236,761			190,618
Net deferred tax liability	(94,284		)	(69,060		)
Less: current net deferred tax asset	12,887			6,485
Net noncurrent deferred tax liability	$	(107,171	)	$	(75,545	)

The net non-current deferred tax asset and liability is reflected on our consolidated balance sheets as of May 31, 2014 and 2013 as follows:



	2014			2013
	(in thousands)
Non-current deferred income tax asset per balance sheet	$	101,928		$	95,178
Non-current deferred income tax liability per balance sheet	(209,099		)	(170,723		)
Net non-current deferred tax liability	$	(107,171	)	$	(75,545	)

Summary of Valuation Allowance

Changes to our valuation allowance during the fiscal year ended May 31, 2014 and 2013 are summarized below (in thousands):



Valuation allowance at May 31, 2012	$	(26,090	)
Allowance for NOLs of foreign subsidiaries	(3,415		)
Allowance for foreign tax credit carryforward	15
Other	1,026
Valuation allowance at May 31, 2013	$	(28,464	)
Allowance for NOLs of foreign subsidiaries	2,822
Release of allowance for capital loss carryforward	18,061
Other	382
Valuation allowance at May 31, 2014	$	(7,199	)

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended May 31, 2014, 2013, and 2012 is as follows:



	2014			2013			2012
	(in thousands)
Balance at the beginning of the year	$	53,763		$	45,595		$	37,197
Additions based on tax positions related to the current year	8,551			8,778			10,684
Additions for tax positions of prior years	296			142			118
Foreign currency impact for tax positions	5,303			(601		)	(2,340		)
Reductions for tax positions of prior years	(60		)	(151		)	(64		)
Settlements with taxing authorities	(277		)	—			—
Balance at the end of the year	$	67,576		$	53,763		$	45,595