Income Taxes

6 Months Ended

Feb. 29, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

We are subject to taxation in the United States and various foreign jurisdictions in which we conduct our business. Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities using currently enacted tax rates.

Income Taxes Provision and Effective Tax Rate

The provision for income taxes and the effective tax rate are as follows:

	Three Months Ended						Six Months Ended
	February 29,			February 28,			February 29,			February 28,
(in thousands)	2024			2023			2024			2023
Income before income taxes	$	168,645		$	156,762		$	343,841		$	314,647
Provision for income taxes	$	27,705		$	25,169		$	54,346		$	46,256
Effective tax rate	16.4		%	16.1		%	15.8		%	14.7		%

Our provision for income taxes for interim periods is calculated by applying an estimate of our annual effective tax rate to our quarter and year-to-date results, adjusted for discrete items recorded in the period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pretax income (or loss) for the year, projections of the proportion of income (or loss) earned and taxed in foreign jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets, then adjusted for any discrete items. On a quarterly basis, we update the estimate of our annual effective tax rate as new events occur, assumptions change, or additional information is obtained.

Our effective tax rate for the three and six months ended February 29, 2024 was lower than the applicable U.S. corporate income tax rate mainly due to a net tax benefit from the employee exercise of stock options, research and development ("R&D") tax credits and utilization of foreign tax credits, partially offset by our state taxes. For the three and six months ended February 28, 2023, our effective tax rate was lower than the applicable U.S. corporate income tax rate mainly due to R&D tax credits, a foreign derived intangible income ("FDII") deduction and a net tax benefit from the employee exercise of stock options.

Our effective tax rate for the three months ended February 29, 2024 was higher than for the three months ended February 28, 2023, mainly driven by higher pretax income at applicable statutory tax rates and a higher overall foreign tax rate, partially offset by an increase in the exercise of stock options and increased utilization of foreign tax credits.

Our effective tax rate for the six months ended February 29, 2024 was higher than for the six months ended February 28, 2023, mainly driven by higher pretax income at applicable statutory tax rates and a higher overall foreign tax rate, partially offset by increased utilization of foreign tax credits.

Undistributed Foreign Earnings

We permanently reinvest all foreign undistributed earnings, except in jurisdictions where earnings can be repatriated substantially free of tax. It is not practicable to determine the deferred tax liability that would be payable if these earnings were repatriated to the U.S.

Inflation Reduction Act of 2022

On August 16, 2022, the Inflation Reduction Act ("IRA") was signed into law. The IRA contains several revisions to the Internal Revenue Code effective for taxable years beginning after December 31, 2022, including a 15% minimum income tax on certain large corporations. We do not expect this revision to have a material impact on our Consolidated Financial Statements.