Income Taxes

12 Months Ended

Oct. 31, 2020

Income Taxes

The following table provides a reconciliation of our effective tax rate from the federal statutory tax rate for the fiscal years ended October 31, 2020, 2019, and 2018 ($ amounts in thousands):


	2020		2019		2018
	$	%*	$	%*	$	%*
Federal tax provision at statutory rate	123,249	21.0	165,306	21.0	217,914	23.3
State tax provision, net of federal benefit	25,793	4.4	37,898	4.8	47,073	5.0
Domestic production activities deduction	—	—	—	—	(18,168)	(1.9)
Other permanent differences	4,755	0.8	4,866	0.6	(2,322)	(0.2)
Reversal of accrual for uncertain tax positions	(1,749)	(0.3)	(5,348)	(0.7)	(4,741)	(0.5)
Accrued interest on anticipated tax assessments	404	0.1	453	0.1	737	0.1
Increase in unrecognized tax benefits	—	—	2,153	0.3	1,122	0.1


Changes in tax law	—	—	(523)	(0.1)	(38,740)	(4.1)
Excess stock compensation benefit	(3,339)	(0.6)	(2,143)	(0.3)	(4,236)	(0.5)
Energy tax credits	(11,467)	(2.0)	(3,123)	(0.4)	(3,231)	(0.4)
Other	2,631	0.5	(2,376)	(0.3)	(9,643)	(1.0)
Income tax provision*	140,277	23.9	197,163	25.0	185,765	19.9

* Due to rounding, percentages may not add

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which changed many longstanding foreign and domestic corporate and individual tax rules, as well as rules pertaining to the deductibility of employee compensation and benefits. The Tax Act, among other changes, reduced the corporate income tax rate from 35% to 21% and repealed the domestic production activities deduction effective for tax years beginning after December 31, 2017. For companies with a fiscal year that does not end on December 31, the change in law requires the application of a blended tax rate for the year of the change. Our blended tax rate for our fiscal year ending October 31, 2018 was 23.3%. Thereafter, the applicable statutory rate is 21%. ASC 740, “Income Taxes” (“ASC 740”), requires all companies to reflect the effects of the new law in the period in which the law was enacted. Accordingly, we reduced the statutory tax rate applied to earnings from 35% in fiscal 2017 to 23.3% in fiscal 2018 and to 21% in fiscal 2019. In addition, we remeasured our net deferred tax liability for the tax law change, which resulted in an income tax benefit of $35.5 million in fiscal 2018.

We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimated that our rate for state income taxes, before federal benefit, will be 5.6% in fiscal 2020. Our state income tax rate, before federal benefit, was 6.1% and 6.6% in fiscal 2019 and 2018, respectively.

The following table provides information regarding the provision (benefit) for income taxes for each of the fiscal years ended October 31, 2020, 2019, and 2018 (amounts in thousands):


	2020		2019		2018
Federal	$	114,204	$	161,904	$	157,836
State	26,073		35,259		27,929
	$	140,277	$	197,163	$	185,765

Current	$	42,497	$	94,399	$	207,695
Deferred	97,780		102,764		(21,930)
	$	140,277	$	197,163	$	185,765

The components of income taxes payable at October 31, 2020 and 2019 are set forth below (amounts in thousands):


	2020		2019
Current	$	6,591	$	7,897
Deferred	192,383		95,074
	$	198,974	$	102,971

The following table provides a reconciliation of the change in the unrecognized tax benefits for the years ended October 31, 2020, 2019, and 2018 (amounts in thousands):


	2020		2019		2018
Balance, beginning of year	$	7,897	$	12,222	$	16,993
Increase in benefit as a result of tax positions taken in prior years	512		2,148		2,140
Increase in benefit as a result of tax positions taken in current year	306		1,126		949
Decrease in benefit as a result of settlements			(2,670)		(4,707)

Decrease in benefit as a result of lapse of statute of limitations	(2,124)		(4,929)		(3,153)
Balance, end of year	$	6,591	$	7,897	$	12,222

The statute of limitations has expired on our federal tax returns for fiscal years through 2016. The statue of limitations for our major state tax jurisdictions remains open for examination for fiscal year 2015 and subsequent years.

Our unrecognized tax benefits are included in the current portion of “Income taxes payable” on our Consolidated Balance Sheets. If these unrecognized tax benefits reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is reasonably possible that the amount of unrecognized tax benefits will change, but we are not able to provide a range of such change. The anticipated changes will be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.

The amounts accrued for interest and penalties are included in the current portion of “Income taxes payable” on our Consolidated Balance Sheets. The following table provides information as to the amounts recognized in our tax provision, before reduction for applicable taxes and reversal of previously accrued interest and penalties, of potential interest and penalties in the fiscal years ended October 31, 2020, 2019, and 2018, and the amounts accrued for potential interest and penalties at October 31, 2020 and 2019 (amounts in thousands):


Expense recognized in the Consolidated Statements of Operations and Comprehensive Income
Fiscal year
2020	$	512
2019	$	593
2018	$	1,152


Accrued at:
October 31, 2020	$	1,270
October 31, 2019	$	1,169

The components of net deferred tax assets and liabilities at October 31, 2020 and 2019 are set forth below (amounts in thousands):


	2020		2019
Deferred tax assets:
Accrued expenses	$	57,089	$	54,162
Impairment charges	42,956		43,583
Inventory valuation differences	48,276		55,313
Stock-based compensation expense	19,905		23,928
Amounts related to unrecognized tax benefits	319		311
State tax, net operating loss carryforwards	68,705		67,718

Other	1,830		18
Total assets	239,080		245,033
Deferred tax liabilities:
Capitalized interest	37,697		44,196
Deferred income	351,589		277,005
Expenses taken for tax purposes not for book	5,346		3,571
Depreciation	23,567		5,024
Deferred marketing	13,264		10,311

Total liabilities	431,463		340,107
Net deferred tax liabilities	(192,383)		(95,074)

In accordance with GAAP, we assess whether a valuation allowance should be established based on our determination of whether it is more-likely-than-not that some portion or all of the deferred tax assets would not be realized. At October 31, 2020 and 2019, we determined that it was more-likely-than-not that our deferred tax assets would be realized. Accordingly, at October 31, 2020 and 2019, we did not have valuation allowances recorded against our federal or state deferred tax assets.

We file tax returns in the various states in which we do business. Each state has its own statutes regarding the use of tax loss carryforwards. Some of the states in which we do business do not allow for the carryforward of losses, while others allow for carryforwards for 5 years to 20 years.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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