Income Taxes

12 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We incur income taxes on the earnings of our U.S. and foreign operations. The following table, based on the locations of the taxable entities from which sales were derived (rather than the location of customers), presents the U.S. and foreign components of our income before income taxes:

	2020		2021		2022
United States	$	849	$	832	$	954
Foreign	160		249		160
	$	1,009	$	1,081	$	1,114

The income shown above was determined according to GAAP. Because those standards sometimes differ from the tax rules used to calculate taxable income, there are differences between: (a) the amount of taxable income and pretax financial income for a year and (b) the tax bases of assets or liabilities and their amounts as recorded in our financial statements. As a result, we recognize a current tax liability for the estimated income tax payable on the current tax return, and deferred tax liabilities (tax on income that will be recognized on future tax returns) and deferred tax assets (tax from deductions that will be recognized on future tax returns) for the estimated effects of the differences mentioned above.

Total income tax expense for a year includes the tax associated with the current tax return (current tax expense) and the change in the net deferred tax asset or liability (deferred tax expense). Our total income tax expense for each of the last three years was as follows:

	2020		2021		2022
Current:
U.S. federal	$	95	$	146	$	205
Foreign	29		50		64
State and local	19		35		18
	143		231		287
Deferred:
U.S. federal	34		(4)		1
Foreign	7		(47)		(9)
State and local	(2)		(2)		(3)
	39		(53)		(11)
	$	182	$	178	$	276

Our consolidated effective tax rate usually differs from current statutory rates due to the recognition of amounts for events or transactions with no tax consequences. The following table reconciles our effective tax rate to the federal statutory tax rate in the United States: 

	Percent of Income Before Taxes
	2020		2021		2022
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of U.S. federal tax benefit	1.7	%	2.4	%	1.0	%
Income taxed at other than U.S. federal statutory rate	—	%	0.3	%	1.3	%
Prior intercompany sales taxed at higher than current U.S. federal statutory rate	—	%	0.2	%	2.0	%
Tax benefit from foreign-derived sales	(2.0	%)	(1.7	%)	(1.8)	%
Adjustments related to prior years	(1.1	%)	(0.2	%)	0.7	%
Excess tax benefits from stock-based awards	(2.0	%)	(1.0	%)	(0.5)	%
Tax rate changes	—	%	—	%	0.4	%
Intercompany transfer of assets	—	%	(4.0	%)	—	%
Other, net	0.4	%	(0.5	%)	0.7	%
Effective rate	18.0	%	16.5	%	24.8	%

Deferred tax assets and liabilities as of the end of each of the last two years were as follows:

April 30,	2021		2022
Deferred tax assets:
Postretirement and other benefits	$	90	$	69
Accrued liabilities and other	47		36
Inventories	30		40
Lease liabilities	17		20
Derivative instruments	5		—
Loss and credit carryforwards	63		69
Total deferred tax assets	252		234
Valuation allowance	(20)		(27)
Total deferred tax assets, net of valuation allowance	232		207
Deferred tax liabilities:
Intangible assets	(214)		(219)
Property, plant, and equipment	(89)		(87)
Right-of-use assets	(17)		(20)
Derivative instruments	—		(11)
Other	(11)		(15)
Total deferred tax liabilities	(331)		(352)
Net deferred tax liability	$	(99)	$	(145)

Details of the loss and credit carryforwards and related valuation allowances as of the end of each of the last two years are as follows:

	April 30, 2021						April 30, 2022
	Gross Amount		Deferred Tax Asset		Valuation Allowance		Gross Amount		Deferred Tax Asset		Valuation Allowance		Expiration (as of April 30, 2022)
U.S.	$	99	$	15	$	(5)	$	53	$	19	$	(8)	Various1
Foreign	228		48		(15)		241		50		(19)		Various2
	$	327	$	63	$	(20)	$	294	$	69	$	(27)

1As of April 30, 2022, the deferred tax asset amount includes credit carryforwards of $8 that do not expire and loss and credit carryforwards of $11 that expire in varying amounts from 2023 to 2039.

2As of April 30, 2022, the deferred tax asset includes loss carryforwards of $19 that do not expire and $31 that expire in varying amounts over the next 9 years.

As of April 30, 2022, we had approximately $1,446 of undistributed earnings from our foreign subsidiaries ($1,542 at April 30, 2021). Most of these earnings have been previously subject to tax, primarily as a result of the one-time repatriation tax on foreign earnings required by the 2017 Tax Cuts and Jobs Act. Historically, we have asserted that the undistributed earnings of our foreign subsidiaries are reinvested indefinitely outside the United States. We continue to maintain indefinite reinvestment assertions for most undistributed earnings of our foreign subsidiaries, and no deferred taxes have been provided on the earnings. For undistributed earnings not considered permanently reinvested, deferred tax liabilities have been provided for any applicable income taxes and withholding taxes payable in various countries, which are not significant. We have also asserted that other outside basis differences related to our foreign subsidiaries are reinvested indefinitely and that the determination of any unrecognized deferred tax liabilities is not practicable due to the complexities in the calculations. The other outside basis differences relate primarily to differences between U.S. GAAP and tax basis that arose through purchase accounting. These basis differences could reverse through sales of foreign subsidiaries or other transactions, none of which are considered probable as of April 30, 2022.

At April 30, 2022, we had $14 of gross unrecognized tax benefits, $11 of which would reduce our effective income tax rate if recognized. A reconciliation of the beginning and ending unrecognized tax benefits follows: 

	2020		2021		2022
Unrecognized tax benefits at beginning of year	$	11	$	11	$	12
Additions for tax positions provided in prior periods	2		1		2
Additions for tax positions provided in current period	—		2		2
Decreases for tax positions provided in prior years	(1)		—		—
Settlements of tax positions in the current period	(1)		(1)		—
Lapse of statutes of limitations	—		(1)		(2)
Unrecognized tax benefits at end of year	$	11	$	12	$	14

We file income tax returns in the United States, including several state and local jurisdictions, as well as in several other countries where we conduct business. The major jurisdictions and their earliest fiscal years that are currently open for tax examinations are 2016 through 2021 in the United States, inclusive of federal and states; 2020 in the United Kingdom; 2018 in Australia; 2017 in Finland, Germany, Hungary, Korea, and Poland; 2016 in the Netherlands and Brazil; and 2013 in Mexico. In addition, we are participating in the Internal Revenue Service's Compliance Assurance Program for our fiscal 2022 tax year.

We believe there will be no material change in our gross unrecognized tax benefits in the next 12 months.