Income Taxes

6 Months Ended

Oct. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our consolidated interim effective tax rate is based on our expected annual operating income, statutory tax rates, and income tax laws in the various jurisdictions where we operate. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the fiscal quarter in which the related event or a change in judgment occurs. The expected effective tax rate on ordinary income for the fiscal year is 23.1%, which is greater than the U.S. federal statutory rate of 21.0%, due to state income taxes, the effects of foreign operations, and the tax expense on prior intercompany sales of inventory that is recognized at tax rates higher than current statutory tax rates.

The effective tax rate of 24.9% for the six months ended October 31, 2021, is higher than the expected tax rate of 23.1% on ordinary income for the full fiscal year, primarily due to the true-up of prior year deferred tax liabilities and the impact of tax rate changes enacted in certain foreign jurisdictions, which is partially offset by the excess tax benefits related to stock-based compensation. The 24.9% effective tax rate for the six months ended October 31, 2021, is higher than the effective tax rate of 16.4% for the same period last year, primarily due to a deferred tax benefit recognized in the prior year period related to an intercompany transfer of assets, increased true-ups of prior year tax liabilities, and the impact of current year changes in tax laws in certain foreign and state jurisdictions.

We continue to assert that the undistributed earnings of most of our foreign subsidiaries are reinvested indefinitely outside the United States. Therefore, no income taxes have been provided for any outside basis differences inherent in these subsidiaries other than those that were subject to the one-time repatriation tax. We previously changed our indefinite reinvestment assertion with respect to current year earnings and prior year undistributed earnings for select foreign subsidiaries (but not for their outside basis differences). No deferred taxes have been recorded as no withholding would be due on their distribution. No further changes have been made to our indefinite reinvestment assertion.