HR Block 2007 Annual Report Download - page 101

The following table reconciles our federal statutory rate of 35% to our We believe the net deferred tax asset at April 30, 2007 of
effective tax rate: $208.0 million is, more likely than not, realizable. We have federal
taxable income in excess of approximately $1.6 billion in the aggregate
Year Ended April 30, 2007 2006 2005
for tax years 2005 and 2006, and substantial state taxable income in the
Statutory tax rate 35.0% 35.0% 35.0%
carry-back period.
Increases in income tax rate resulting
As of April 30, 2007, we had net operating loss (NOLs) carryforwards
from:
for tax purposes in various states and foreign countries of
State income taxes, net of Federal
approximately $582.6 million. We recorded deferred tax assets of
income tax benefit 3.7% 4.3% 3.9%
$24.5 million related to these NOLs and a related valuation allowance of
Other 2.4% 2.4% 0.5%
$21.2 million. If not used, these carryforwards will expire in varying
Effective tax rate 41.1% 41.7% 39.4%
amounts during fiscal years 2008 through 2026.
Deferred income taxes reflect the future tax consequences We intend to indefinitely reinvest foreign earnings, therefore, a
attributable to differences between the financial statement carrying provision has not been made for income taxes that might be payable
amounts of existing assets and liabilities and their respective tax bases. upon remittance of such earnings. Moreover, due to the availability of
The components of deferred taxes of continuing operations are as foreign income tax credits, management believes the amount of federal
follows: income taxes would be immaterial in the event foreign earnings were
(in 000s)
repatriated.
April 30, 2007 2006
The loss from discontinued operations for fiscal year 2007 of
Gross deferred tax assets:
$808.0 million is net of tax benefits of $425.0 million, and includes
Accrued expenses $79,696 $57,902
income tax benefits related to OOMC totaling $374.6 million. Income
Allowance for credit losses and related reserves 48,096 24,186
taxes for discontinued operations also included one-time benefits of
Current 127,792 82,088
$16.2 million related to permanent deductions for the tax basis of
Deferred and stock-based compensation 80,991 86,582
investments in two subsidiaries that were abandoned during the year.
Property and equipment 46,267 44,715
Assets of discontinued operations held for sale includes deferred tax
Deferred revenue 54,542 57,836 73 m
assets of $393.6 million, net of the related valuation allowance, and
Net operating losses 24,476 16,395
deferred tax liabilities of $94.0 million as of April 30, 2007. In addition,
Noncurrent 206,276 205,528
we recorded a valuation allowance of $55.8 million, which primarily
334,068 287,616
relates to deferred tax assets for capital losses and basis differences in
Valuation allowance (37,302) (25,740)
certain state jurisdictions. Deferred tax assets of $183.2 million relate to
296,766 261,876
certain residual assets. Although the tax position associated with these
Gross deferred tax liabilities:
deferred tax assets is more likely than not of being sustained, there is a
Prepaid expenses and revenue deferred for tax (10,571) (14,636)
level of uncertainty associated with the amount of benefit. We believe
Current (10,571) (14,636)
the net deferred tax asset at April 30, 2007 is, more likely than not,
realizable.
Intangible assets (78,189) (65,066)
Noncurrent (78,189) (65,066)
Net deferred tax assets $208,006 $182,174
The net change in the total valuation allowance for fiscal years 2007
and 2006 was $11.6 million and $5.5 million, respectively. The valuation
allowance for deferred tax assets as of April 30, 2007 was $37.3 million.
H&R BLOCK 2007 Form 10K