Income Taxes

9 Months Ended

Jan. 31, 2023

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 24.3%, which is greater than the U.S. federal statutory rate of 21.0%, due to state taxes, effects of foreign operations and the impact of prior intercompany sales of inventory taxed at rates higher than current statutory tax rates, partially offset by the impact of the foreign-derived intangible income deduction.

The effective tax rate of 23.0% for the nine months ended January 31, 2023, is lower than the expected tax rate of 24.3% on ordinary income for the full fiscal year, primarily due to the reversal of valuation allowances in the current period and the beneficial impact of prior fiscal year true-ups, which is partially offset by increased contingent tax liabilities and deferred taxes recorded in connection with a change in our indefinite reinvestment assertion. The effective tax rate of 23.0% for the nine months ended January 31, 2023, was lower than the effective tax rate of 23.4% for the same period last year, primarily due to increased beneficial impact of prior year true-ups and the reversal of valuation allowances in the current period, which is partially offset by increased state taxes and increased contingent tax liabilities.

During the second quarter of fiscal 2023, we lifted our indefinite reinvestment assertion for certain additional foreign subsidiaries with respect to their current earnings and prior year undistributed earnings (but not for their other outside basis differences) and have recorded deferred taxes for any income tax impacts that would result from cash distributions, including any withholding taxes. For most of our other foreign subsidiaries, we continue to assert that their outside basis differences, including current year and prior year undistributed earnings, are indefinitely reinvested outside the United States and no income taxes have been provided on those earnings, other than the one-time repatriation tax related to the 2017 Tax Cuts and Jobs Act.