INCOME TAXES

3 Months Ended

Jul. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7: INCOME TAXES

We file a consolidated federal income tax return in the U.S. with the IRS and file tax returns in various state, local, and foreign jurisdictions. Tax returns are typically examined and either settled upon completion of the examination or through the appeals process. Our U.S. federal income tax returns for 2017 and later years remain open for examination. Our U.S. federal income tax returns for 2016 and all prior periods are closed. With respect to state and local jurisdictions and countries outside of the U.S., we are typically subject to examination for three to six years after the income tax

returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest, and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to federal, state, local or foreign audits.

A discrete income tax expense of $0.6 million was recorded in the three months ended July 31, 2020 compared to a discrete tax benefit of $8.3 million in the same period of the prior year. The discrete tax expense recorded in the current period primarily resulted from interest recorded on existing uncertain tax benefits. The discrete tax benefit recorded in the prior year resulted primarily from favorable audit settlements and valuation allowance changes related to utilization of foreign losses.

Our effective tax rate for continuing operations, including the effects of discrete tax items, was 24.6% and 29.6% for the three months ended July 31, 2020 and 2019, respectively. Discrete items increased the effective tax rate for the three months ended July 31, 2020 and 2019 by 0.5% and 4.0%, respectively. The impact of discrete tax items combined with the seasonal nature of our business can cause the effective tax rate through our first quarter to be significantly different than the rate for our full fiscal year.

We had gross unrecognized tax benefits of $171.6 million, $179.2 million and $168.1 million as of July 31, 2020 and 2019 and April 30, 2020, respectively. The gross unrecognized tax benefits increased $3.5 million and decreased$5.9 million during the three months ended July 31, 2020 and 2019, respectively. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $12.1 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations and anticipated closure of various tax matters currently under exam. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.