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Income Taxes
 12 Months Ended
Jul. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes and losses of unconsolidated affiliate consists of the following:
 Years Ended July 31,
 202320222021
United States$92,053 $92,985 $59,504 
Other Nations133,643 98,995 111,519 
Total$225,696 $191,980 $171,023 
The increase in income before income taxes and losses of unconsolidated affiliates in Other Nations to $133,643 in fiscal 2023 from $98,995 in fiscal 2022 was primarily due to intercompany royalty payments to the United States that occurred in fiscal 2022 which reduced Other Nations income before income taxes and losses of unconsolidated affiliate by $32,857.
The decrease in income before income taxes and losses of unconsolidated affiliate in Other Nations to $98,995 in fiscal 2022 from $111,519 in fiscal 2021 was primarily due to intercompany royalty payments to the United States that occurred in fiscal 2022 which reduced Other Nations income before income taxes and losses of unconsolidated affiliate by $32,857. This was partially offset by improved profitability in Other Nations in fiscal 2022 compared to fiscal 2021.
Income tax expense consists of the following:
 Years Ended July 31,
 202320222021
Current income tax expense:
United States$26,324 $8,639 $16,322 
Other Nations31,093 31,851 26,141 
States (U.S.)5,894 3,156 2,112 
$63,311 $43,646 $44,575 
Deferred income tax (benefit) expense:
United States$(10,577)$970 $(2,662)
Other Nations251 (2,377)(5,938)
States (U.S.)(2,146)(238)(365)
$(12,472)$(1,645)$(8,965)
Total income tax expense$50,839 $42,001 $35,610 
The tax effects of temporary differences are as follows as of July 31, 2023 and 2022:
 July 31, 2023
 AssetsLiabilitiesTotal
Inventories$8,526 $(64)$8,462 
Employee compensation and benefits8,556 — 8,556 
Accounts receivable2,202 — 2,202 
Fixed assets3,118 (9,238)(6,120)
Intangible assets760 (49,267)(48,507)
Capitalized R&D expenditures9,986 — 9,986 
Deferred and equity-based compensation9,937 — 9,937 
Postretirement benefits2,683 (100)2,583 
Tax credit and net operating loss carry-forwards51,387 — 51,387 
Valuation allowances(52,750)— (52,750)
Other, net19,826 (4,798)15,028 
Total$64,231 $(63,467)$764 
 July 31, 2022
 AssetsLiabilitiesTotal
Inventories$8,112 $(54)$8,058 
Employee compensation and benefits8,146 — 8,146 
Accounts receivable2,105 — 2,105 
Fixed assets3,177 (9,618)(6,441)
Intangible assets859 (50,095)(49,236)
Deferred and equity-based compensation9,221 — 9,221 
Postretirement benefits2,301 — 2,301 
Tax credit and net operating loss carry-forwards49,006 — 49,006 
Valuation allowances(47,276)— (47,276)
Other, net17,919 (5,226)12,693 
Total$53,570 $(64,993)$(11,423)
Tax credit carry-forwards as of July 31, 2023 consist of the following:
•Foreign net operating loss carry-forwards of $95,141, of which $76,902 have no expiration date and the remainder of which expire from fiscal 2024 to fiscal 2040.
•State net operating loss carry-forwards of $22,424, which expire in fiscal 2032.
•Foreign tax credit carry-forwards of $20,153, which expire from fiscal 2024 to fiscal 2033.
•State credit carry-forwards of $13,151, which expire from fiscal 2024 to fiscal 2038.
Rate Reconciliation
A reconciliation of the income tax rate computed by applying the statutory U.S. federal income tax rate to income before income taxes and losses of unconsolidated affiliate to the total income tax expense is as follows:
 Years Ended July 31,
 202320222021
Tax at statutory rate21.0 %21.0 %21.0 %
International rate differential (1)
1.7 %4.2 %2.3 %
Adjustments to tax accruals and reserves0.2 %(0.1)%3.3 %
Research and development tax credits(1.3)%(1.6)%(1.6)%
Valuation allowance against foreign tax credits and foreign net operating loss carry-forwards1.2 %(1.2)%(4.8)%
Deferred tax and other adjustments, net(0.3)%(0.4)%0.6 %
Income tax rate22.5 %21.9 %20.8 %
(1)Represents the foreign income tax rate differential when compared to the U.S. statutory income tax rate for the years ended July 31, 2023, 2022, and 2021.
Uncertain Tax Positions
The Company follows the guidance in ASC 740, "Income Taxes" regarding uncertain tax positions. The guidance requires application of a more-likely-than-not threshold to the recognition and de-recognition of income tax positions. A reconciliation of unrecognized tax benefits (excluding interest and penalties) is as follows:
Balance as of July 31, 2020$13,622 
Additions based on tax positions related to the current year4,664 
Additions for tax positions of prior years (1)
3,940 
Reductions for tax positions of prior years(365)
Lapse of statute of limitations(159)
Cumulative translation adjustments and other210 
Balance as of July 31, 2021$21,912 
Additions based on tax positions related to the current year3,233 
Additions for tax positions of prior years435 
Reductions for tax positions of prior years(122)
Lapse of statute of limitations(3,226)
Settlements with tax authorities(1,129)
Cumulative translation adjustments and other(539)
Balance as of July 31, 2022$20,564 
Additions based on tax positions related to the current year2,902 
Additions for tax positions of prior years792 
Reductions for tax positions of prior years(19)
Lapse of statute of limitations(2,682)
Settlements with tax authorities(782)
Cumulative translation adjustments and other124 
Balance as of July 31, 2023$20,899 
(1)Includes acquisitions.
Of the $20,899 of unrecognized tax benefits, if recognized, $17,811 would affect the Company's income tax rate. The Company has classified $17,587 and $17,689, excluding interest and penalties, of the reserve for uncertain tax positions in "Other liabilities" on the Consolidated Balance Sheets as of July 31, 2023 and 2022, respectively. The Company has classified $3,312 and $2,875, excluding interest and penalties, as a reduction of long-term deferred income tax assets on the accompanying Consolidated Balance Sheets as of July 31, 2023 and 2022, respectively.
Interest expense is recognized on the amount of potentially underpaid taxes associated with the Company's tax positions, beginning in the first period in which interest starts accruing under the respective tax law and continuing until the tax positions are settled. The Company recognized interest expense of $700, $701, and $596 on the reserve for uncertain tax positions during the years ended July 31, 2023, 2022, and 2021, respectively. The Company also recognized benefits and (expenses) related to penalties of $281, $82, and ($595) during the years ended July 31, 2023, 2022, and 2021, respectively. These amounts are net of reversals due to reductions for tax positions of prior years, statute of limitations, and settlements. At July 31, 2023 and 2022, the Company had $3,581 and $2,878, respectively, accrued for interest on unrecognized tax benefits. Penalties are accrued if the tax position does not meet the minimum statutory threshold to avoid the payment of a penalty. At July 31, 2023 and 2022, the Company had $1,674 and $1,925, respectively, accrued for penalties on unrecognized tax benefits. Interest expense and penalties are recorded as a component of "Income tax expense" in the Consolidated Statements of Income.
The Company estimates that it is reasonably possible that the unrecognized tax benefits may be reduced by $2,608 during the year ending July 31, 2023 as a result of the resolution of worldwide tax matters, tax audit settlements, amended tax filings, and/or the expiration of statute of limitations, all of which, if recognized, would result in an income tax benefit in the Consolidated Statements of Income.
During the year ended July 31, 2023, the Company recognized $3,771 of tax benefits (including interest and penalties) associated with the lapse of statutes of limitations.
The Company and its subsidiaries file income tax returns in the U.S., various states, and foreign jurisdictions. The following table summarizes the open tax years for the Company's major jurisdictions:
JurisdictionOpen Tax Years
United States — FederalF’20 — F’23