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Income Taxes
6 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Taxes

NOTE 9: INCOME TAXES

DeVry's effective income tax rate reflects benefits derived from significant operations outside the United States. Earnings of these international operations are not subject to U.S. federal or state income taxes, so long as such earnings are not repatriated, as discussed below. Three of DeVry's subsidiaries, Ross University School of Medicine (the Medical School) incorporated under the laws of the Commonwealth of Dominica, Ross University School of Veterinary Medicine (the Veterinary School) incorporated under the laws of the Federation of St. Christopher, Nevis, St. Kitts in the West Indies, and DeVry Brasil incorporated under the laws of Brazil, all benefit from local tax incentives. The Medical and Veterinary Schools have agreements with the respective governments that exempt them from local income taxation through the years 2043 and 2023, respectively, while DeVry Brasil's effective tax rate reflects benefits derived from their participation in PROUNI, a Brazilian program for providing scholarships to a portion of its undergraduate students.

DeVry has not recorded a U.S. federal or state tax provision for the undistributed earnings of its international subsidiaries. It is DeVry's intention to indefinitely reinvest accumulated cash balances, future cash flows and post-acquisition undistributed earnings and profits to improve the facilities and operations of its international Schools and pursue future opportunities outside the United States. In accordance with this plan, cash held by the international subsidiaries will not be available for general company purposes and under current laws will not be subject to U.S. taxation. As of December 31 2011 and 2010, cumulative undistributed earnings attributable to international operations were approximately $375.4 million and $298.8 million, respectively.

The effective tax rate was 46.0% for the second quarter and 31.2% for first six months of fiscal year 2012, compared to 34.5% for the prior year second quarter and first six months. The higher effective income tax rate in the second quarter of fiscal year 2012 was due primarily to the non-deductibility of a significant portion of the goodwill associated with the Carrington impairment charge. This increase was partially offset by a decrease in the proportion of income generated by U.S. operations versus the offshore operations of Ross University, AUC and DeVry Brasil as compared to the prior year. The effective income tax rate in the first sixth months declined from the prior year as a result of the decrease in proportional U.S. generated income.

 

As of December 31, 2011, the total amount of gross unrecognized tax benefits for uncertain tax positions, including positions impacting only the timing of tax benefits, was $9.1 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $9.1 million. As of December 31, 2010, gross unrecognized tax benefits, including positions impacting only the timing of benefits, was $6.5 million. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $6.5 million. We expect that our unrecognized tax benefits will decrease by an insignificant amount during the next twelve months. DeVry classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. The total amount of interest and penalties accrued at June 30, 2011 was $1.0 million. The corresponding amount at December 31, 2011 was not materially different from the amount at June 30, 2011.

 

The Internal Revenue Service is currently examining DeVry's 2010 U.S. Federal Income Tax Return. DeVry generally remains subject to examination for all tax years beginning on or after July 1, 2006.