Income Taxes (Tables)

12 Months Ended

Aug. 31, 2011

Geographic sources of income (loss) from continuing operations before income taxes are as follows:



($ in thousands)	2011			2010			2009
United States	$	1,213,353		$	1,227,794		$	1,085,704
Foreign	(259,406		)	(226,726		)	(18,777		)
Total income from continuing operations before income taxes	$	953,947		$	1,001,068		$	1,066,927

Income tax expense (benefit)

Income tax expense (benefit) consists of the following for fiscal years 2011, 2010 and 2009:



($ in thousands)	2011			2010			2009
Current:
Federal	$	350,640		$	458,375		$	377,911
State	11,372			131,284			93,350
Foreign	1,129			(218		)	(1,025		)
Total current	363,141			589,441			470,236
Deferred:
Federal	62,474			(106,834		)	(8,667		)
State	10,214			(7,574		)	(4,872		)
Foreign	(15,191		)	(10,970		)	23
Total deferred	57,497			(125,378		)	(13,516		)
Total provision for income taxes	$	420,638		$	464,063		$	456,720

Deferred tax assets and liabilities

Deferred tax assets and liabilities result primarily from temporary differences in book versus tax basis accounting. Deferred tax assets and liabilities consist of the following as of August 31:



($ in thousands)	2011			2010
Deferred tax assets:
Allowance for doubtful accounts	$	44,364		$	72,344
Deferred rent and tenant improvement allowances	25,198			28,921
Net operating loss carry-forward	10,718			17,629
Litigation charge	61,502			70,383
Share-based compensation	67,697			63,168
Other	59,001			73,821
Gross deferred tax assets	268,480			326,266
Valuation allowance	(10,446		)	(14,645		)
Deferred tax assets, net of valuation allowance	258,034			311,621
Deferred tax liabilities:
Fixed assets	57,314			39,276
Intangible assets	30,738			40,069
Other	1,296			5,531
Gross deferred tax liabilities	89,348			84,876
Net deferred income taxes	$	168,686		$	226,745

Unrecognized tax benefits

The following is a tabular reconciliation of the total amount of unrecognized tax benefits, excluding interest and penalties, at the beginning and the end of fiscal years 2011 and 2010:



($ in thousands)
Balance at August 31, 2009	$	84,861
Additions based on tax positions taken in the current year	99,590
Additions for tax positions taken in prior years	18,323
Settlement with tax authorities	(20,665		)
Reductions for tax positions of prior years	(11,733		)
Reductions due to lapse of applicable statute of limitations	(4,328		)
Balance at August 31, 2010	166,048
Additions based on tax positions taken in the current year	4,503
Additions for tax positions taken in prior years	15,570
Settlement with tax authorities	(110,980		)
Reductions for tax positions of prior years	(45,231		)
Reductions due to lapse of applicable statute of limitations	(4,099		)
Balance at August 31, 2011	$	25,811

Income tax rate reconciliation

The provision for income taxes differs from the tax computed using the statutory U.S. federal income tax rate as a result of the following items for fiscal years 2011, 2010 and 2009:



	2011		2010		2009
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit⁽¹⁾	1.8	%	6.3	%	5.1	%
Non-deductible compensation, net⁽²⁾	0.3	%	(1.1	)%	0.4	%
Foreign taxes	0.8	%	1.1	%	0.6	%
Litigation charge	(1.0	)%	—	%	0.9	%
Goodwill impairments	7.4	%	5.8	%	—	%
Meritus closure	(0.8	)%	—	%	—	%
Other, net	0.6	%	(0.7	)%	0.8	%
Effective income tax rate	44.1	%	46.4	%	42.8	%

⁽¹⁾In fiscal year 2011, we realized a $43.3 million benefit associated with our resolution with the Arizona Department of Revenue. See further discussion below.

⁽²⁾In fiscal year 2010, we recorded benefits of $10.2 million and $1.2 million associated with our settlement of a dispute with the Internal Revenue Service. See further discussion below.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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