NOTE 15: INCOME TAXES

The components of income from continuing operations upon which domestic and foreign income taxes have been provided are as follows:


	(in 000s)
Year ended April 30,	2012		2011		2010
Domestic	$	547,535	$	590,024	$	684,787
Foreign		28,535		37,679		38,627

	$	576,070	$	627,703	$	723,414

The components of income tax expense of continuing operations are as follows:


	(in 000s)
Year ended April 30,	2012		2011			2010
Current:
Federal	$	126,773	$	171,337		$	95,473
State		21,285		40,433			23,674
Foreign		8,647		21,456			16,331

		156,705		233,226			135,478

Deferred:
Federal		55,032		(1,762	)		104,606
State		18,154		3,404			28,035
Foreign		211		288			172

		73,397		1,930			132,813

Total income taxes for continuing operations	$	230,102	$	235,156		$	268,291

The reconciliation between the income tax provision and the amount computed by applying the statutory federal tax rate of 35% to income taxes of continuing operations is as follows:

		$xxx,x			$xxx,x			$xxx,x
Year ended April 30,	2012			2011			2010
U.S. statutory tax rate		35.0	%		35.0	%		35.0	%
Change in tax rate resulting from:
State income taxes, net of federal income tax benefit		4.2	%		4.4	%		3.7	%
Permanent differences		0.5	%		(0.6	%)		(0.8	%)
Uncertain tax positions		(0.6	%)		1.2	%		1.0	%
Net change in valuation allowance		0.2	%		(1.4	%)		(1.1	%)
Other		0.6	%		(1.1	%)		(0.7	%)

Effective tax rate		39.9	%		37.5	%		37.1	%

The significant components of deferred tax assets and liabilities are reflected in the following table:

		$xxxxxxxx			$xxxxxxxx
	(in 000s)
As of April 30,	2012			2011
Gross deferred tax assets:
Accrued expenses	$	21,533		$	46,607
Allowance for credit losses and related reserves		102,819			94,796
Valuation allowance		(33,672	)		(47,300	)

Current		90,680			94,103

Deferred and stock-based compensation		23,590			69,114
Deferred revenue		26,181			23,166
Net operating loss carryovers		18,202			19,850
ASC 740 asset related to unrecognized tax benefits		31,824			32,481
Capital loss carryover		85,778			150,876
Other		2,901			15,636
Valuation allowance		(43,771	)		(93,122	)

Noncurrent		144,705			218,001

		235,385			312,104
Gross deferred tax liabilities:
Prepaid expenses		(3,641	)		(1,674	)

Current		(3,641	)		(1,674	)

Property and equipment		(19,454	)		(11,182	)
Basis difference in mortgage-related investment		(63,115	)		(49,751	)
Intangibles		(33,935	)		(53,352	)

Noncurrent		(116,504	)		(114,285	)

Net deferred tax assets	$	115,240		$	196,145

The net loss from discontinued operations for fiscal year 2012 totaled $80.0 million, compared to net income of $13.6 million and $24.1 million in fiscal years 2011 and 2010, respectively. These amounts are net of tax benefits of $74.9 million in fiscal year 2012 and tax expense of $13.8 million and $18.9 million in fiscal years 2011 and 2010, respectively. The effective tax rate for discontinued operations was 48.4%, 50.5% and 44.0% for fiscal years 2012, 2011 and 2010, respectively.

As of April 30, 2012 and 2011, we have deferred tax assets related to capital loss carry-forwards totaling $85.8 million and $150.9 million, respectively, which resulted primarily from the sale of our brokerage business in November 2008. Generally, for tax purposes, a capital loss can only be utilized to the extent we realize capital gains within five years of the end of the taxable year in which the capital loss was incurred. We do not currently expect to be able to realize a tax benefit for a large portion of this loss and, therefore, recorded a valuation allowance of $63.6 million and $126.3 million as of April 30, 2012 and 2011, respectively. As of April 30, 2012, the capital loss carryover totaled approximately $212 million, and will expire if not used to offset future capital gains before December 31, 2013.

Intraperiod tax allocation requires that the provision for income taxes be allocated between continuing operations and other categories of earnings, such as discontinued operations or other comprehensive income, for each tax jurisdiction. Included in the income tax benefits allocated to discontinued operations is a reduction to our capital loss valuation allowance amounting to approximately $60 million for the current fiscal year associated with the tax effects of the disposition of businesses.

During fiscal years 2012 and 2011, we changed our measurement of the more-likely-than-not tax basis of certain assets of a subsidiary as a result of new information, resulting in an increase to noncurrent deferred tax liabilities by $36.7 million and $66.3 million in fiscal years 2012 and 2011, respectively.

Certain of our subsidiaries file stand-alone returns in various states and foreign jurisdictions, and others join in filing consolidated or combined returns in such jurisdictions. At April 30, 2012, we had net operating losses (NOLs) in various states and foreign jurisdictions. The amount of state NOLs vary by taxing jurisdiction. We recorded deferred tax assets of $18.2 million for the tax effects of such losses and a valuation allowance of $12.8 million for the portion of such losses that, more likely than not, will not be realized. If not used, the NOLs will expire in varying amounts during fiscal years 2013 through 2032.

We intend to indefinitely reinvest foreign earnings for virtually all of our foreign companies; therefore, no material provision has been made for income taxes that might be payable upon remittance of such earnings. Determination of the amount of unrecognized deferred tax liability on unremitted foreign earnings is not practicable.

Changes in unrecognized tax benefits for fiscal years 2012, 2011 and 2010 are as follows:

		$xxxxx			$xxxxx			$xxxxx
	(in 000s)
Year ended April 30,	2012			2011			2010
Balance, beginning of the year	$	154,848		$	129,767		$	124,605
Additions based on tax positions related to prior years		26,523			28,262			12,957
Reductions based on tax positions related to prior years		(3,858	)		(1,473	)		(2,427	)
Additions based on tax positions related to the current year		42,735			3,417			3,314
Reductions related to settlements with tax authorities		(8,742	)		(7,639	)		(8,545	)
Expiration of statute of limitations		(2,814	)		(315	)		(1,061	)
Foreign currency translation		(838	)		1,057			924
Other		(1,461	)		1,772			—

Balance, end of the year	$	206,393		$	154,848		$	129,767

Of the total ending gross unrecognized tax benefit balance as of April 30, 2012, 2011 and 2010, respectively, $150.4 million, $117.6 million and $106.8 million, respectively, if recognized, would impact our effective rate. The difference results from adjusting the gross balances for such items as federal, state and foreign deferred items, interest and deductible taxes. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $66 million within the next twelve months due to settlements of audit issues and expiration of statutes of limitations.

Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. The amount of gross interest and penalties accrued on uncertain tax positions decreased $5.5 million during fiscal year 2012 and increased $4.4 million and $4.1 million in fiscal years 2011 and 2010, respectively. The total gross interest and penalties accrued as of April 30, 2012, 2011 and 2010 totaled $38.6 million, $44.1 million and $39.7 million, respectively.

We file a consolidated federal income tax return in the U.S. and file tax returns in various state and foreign jurisdictions. The U.S. federal consolidated tax returns for the calendar years 1999 through 2010 are currently under examination by the Internal Revenue Service (IRS), with the 1999-2007 years currently at the appellate level. Federal returns for tax years prior to 1999 are closed by statute. Historically, tax returns in various foreign and state jurisdictions are examined and settled upon completion of the exam.