INCOME TAXES

6 Months Ended

Apr. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE J - INCOME TAXES

The Company's tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. The effects of tax legislation are recognized in the period in which the law is enacted. The deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years the related temporary differences are anticipated to reverse.

The Company's effective tax rate for the quarter and six months ended April 30, 2023, was 22.1 percent and 22.4 percent, respectively, compared to 18.7 percent and 20.5 percent, respectively, for the corresponding periods a year ago. The higher effective tax rate in the current quarter and first six months of fiscal 2023 is primarily due to the decrease in tax benefits from stock option exercises.

The amount of unrecognized tax benefits, including interest and penalties, is recorded in Other Long-term Liabilities. These benefits, if recognized as of April 30, 2023, would impact the Company’s effective tax rate by $19.3 million compared to $21.0 million as of May 1, 2022. The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense. Interest and penalties included in income tax expense was immaterial for the quarters ended April 30, 2023, and May 1, 2022. The amount of accrued interest and penalties associated with unrecognized tax benefits was $3.0 million at April 30, 2023, and $5.8 million at May 1, 2022.

The Company is regularly audited by federal and state taxing authorities. The I.R.S. concluded their examination of fiscal year 2021 in the second quarter. Previously, the I.R.S. placed the Company in the Bridge phase of the Compliance Assurance Process (CAP) for fiscal 2020. In this phase, the I.R.S. will not accept any disclosures, conduct any reviews, or provide any assurances. The Company has elected to participate in CAP for fiscal years through 2023. The objective of CAP is to contemporaneously work with the I.R.S. to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time.

The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 2015. While it is reasonably possible that one or more of these audits may be completed within the next 12 months and the related unrecognized tax benefits may change based on the status of the examinations, it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.

The Inflation Reduction Act of 2022 was signed into law on August 16, 2022. The 15% corporate minimum tax will not apply to the Company until fiscal year 2024.