Income Taxes

3 Months Ended

Feb. 29, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our income tax provision for the three months ended February 29, 2020 and February 28, 2019 reflects our estimate of the effective tax rates expected to be applicable for the full fiscal years, adjusted for any discrete events which are recorded in the period they occur. The estimates are reevaluated each quarter based on our estimated tax expense for the full fiscal year.

Our effective tax rate was 23% in the first quarter of fiscal year 2020 compared to 30% in the first quarter of fiscal year 2019.  The primary reason for the decrease in the effective rate as compared to the prior period is that during the preparation of our financial statements for the three months ended August 31, 2019, we identified an error in our income tax provisions for the first and second quarters of fiscal year 2019 related to the tax treatment of an intercompany sale of intellectual property that occurred in fiscal year 2018. As a result of the error, income tax expense was overstated by $1.1 million and $2.5 million during the first and second quarters of fiscal year 2019, respectively. We determined that the error was not material to the first and second quarters of fiscal year 2019 and corrected the error by recording an out of period $3.6 million tax benefit in our financial statements for the period ended August 31, 2019. If the error had not occurred, the effective tax rate in the first quarter of fiscal year 2019 would have been 22%.

Our Federal income tax returns have been examined or are closed by statute for all years prior to fiscal year 2016. Our state income tax returns have been examined or are closed by statute for all years prior to fiscal year 2013.

Tax authorities for certain non-U.S. jurisdictions are also examining returns. With some exceptions, we are generally not subject to tax examinations in non-U.S. jurisdictions for years prior to fiscal year 2013.