v3.26.3
Income Taxes
 12 Months Ended
Jul. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
Note 8. Income Taxes
The components of earnings before income taxes were as follows (in millions):
Year Ended July 31,
202620252024
U.S.$226.2 $245.5 $233.4 
Foreign359.6 246.7 301.9 
Total$585.8 $492.2 $535.3 
The components of the provision for income taxes were as follows (in millions):
Year Ended July 31,
202620252024
Current
Federal$22.9 $52.0 $47.2 
State7.5 9.2 8.8 
Foreign101.9 88.0 89.6 
Total current132.3 149.2 145.6 
Deferred
Federal0.2 (13.5)(16.1)
State(0.3)(1.3)(1.7)
Foreign(0.2)(9.2)(6.5)
Total deferred(0.3)(24.0)(24.3)
Total provision for income taxes$132.0 $125.2 $121.3 
The components of income taxes paid, net of refunds, were as follows (in millions):
Year Ended July 31,
2026
Federal$47.1 
State10.1 
Foreign103.7 
Total$160.9 
Income taxes paid, net of refunds, exceeded 5 percent of total income taxes paid, net of refunds, in the following jurisdictions (in millions):
Year Ended July 31,
2026
Mexico$22.6 
China$12.0 
Income taxes paid, net of refunds for the fiscal years ended July 31, 2025 and 2024, were $176.2 million and $147.8 million, respectively.
The reconciliation of the U.S. statutory federal income tax rate with the effective income tax rate after the adoption of ASU 2023-09 was as follows (in millions):
Year Ended July 31,
2026
U.S. statutory federal income tax rate$123.0 21.0 %
Domestic state and local income taxes, net of federal tax effect (1)
5.3 0.9 %
Foreign tax effects26.4 4.5 %
Effect of changes in tax laws or rates enacted in the current period— — %
Effect of cross-border tax laws
Foreign tax credit on withholding taxes(8.3)(1.4)%
Foreign derived intangible income(4.8)(0.8)%
Other(4.0)(0.7)%
Tax credits(1.9)(0.3)%
Changes in valuation allowances1.1 0.2 %
Nontaxable or nondeductible items
Tax benefits on stock-based compensation(8.1)(1.4)%
Other3.1 0.5 %
Changes in unrecognized tax benefits0.2 — %
Effective income tax rate$132.0 22.5 %
(1)     The state and local jurisdictions comprising the majority (greater than 50 percent) of the tax effect in this category include Illinois, California, Texas and Indiana.
The reconciliation of the U.S. statutory federal income tax rate with the effective income tax rate prior to the adoption of ASU 2023-09 was as follows:
Year Ended July 31,
20252024
U.S. statutory federal income tax rate21.0 %21.0 %
State income taxes1.8 1.2 
Foreign operations2.5 2.7 
Global intangible low tax income0.2 0.2 
Foreign derived intangible income(1.5)(1.3)
Research and development credit(1.0)(0.9)
Change in unrecognized tax benefits0.2 1.2 
Tax benefits on stock-based compensation (0.9)(1.2)
Change in valuation allowance related to impairment2.6 — 
Other0.5 (0.2)
Effective income tax rate25.4 %22.7 %
The tax effects of temporary differences that give rise to deferred tax assets and liabilities were as follows (in millions):
July 31,
20262025
Deferred tax assets
Accrued expenses$18.9 $14.6 
Compensation and retirement plans24.5 30.4 
Capitalization of R&D costs44.5 42.1 
Net operating loss (NOL) and tax credit carryforwards33.5 26.7 
Operating lease assets14.5 15.5 
Other10.0 12.6 
Gross deferred tax assets145.9 141.9 
Valuation allowance(32.3)(30.0)
Deferred tax assets, net of valuation allowance113.6 111.9 
Deferred tax liabilities
Depreciation and amortization(80.0)(55.9)
Operating lease liabilities(13.2)(15.1)
Other(5.1)(2.8)
Deferred tax liabilities(98.3)(73.8)
Net deferred tax asset$15.3 $38.1 
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into U.S. law, which primarily modified tax provisions from the 2017 Tax Cuts and Jobs Act. The provisions within the OBBBA have staggered effective dates to be phased in between fiscal years 2025 and 2027. The provisions that became effective during the current fiscal year did not have a significant impact on our Consolidated Financial Statements. The Company continues to evaluate the future impact of OBBBA provisions effective beginning in fiscal year 2027.
The activity in the NOL and tax credit valuation allowances was as follows (in millions):
Year Ended July 31,
202620252024
Balance as of beginning of year$(22.7)$(9.1)$(6.4)
Additions charged to costs and expenses(5.2)(14.0)(3.6)
Deductions from reserves0.3 0.4 0.9 
Balance as of end of year$(27.6)$(22.7)$(9.1)
As of July 31, 2026, the Company had deferred tax assets related to U.S. federal foreign tax credits of $14.7 million, related to state research and development credits of $4.0 million and related to foreign operating loss carryovers of $14.2 million. The U.S. federal tax credits will expire after 10 years, the state portion after one to 20 years and the foreign portion has an indefinite carryover period. As of July 31, 2026, the Company had provided $27.6 million for a valuation allowance against certain of these deferred tax assets based on management’s determination it is more likely than not the tax benefits related to these assets will not be realized.
As of July 31, 2026, the total undistributed earnings of the Company’s non-U.S. subsidiaries were $1.5 billion, of which $1.1 billion were not considered indefinitely reinvested. The Company is subject to foreign withholding taxes on a small portion of these earnings distributable in the future in the form of dividends. Thus, the Company provides for foreign withholding taxes payable upon future dividend distributions of the earnings not considered indefinitely reinvested annually. For the year ended July 31, 2026, the Company recognized a tax charge of $4.3 million related to these foreign withholding taxes. The remaining $405.7 million of earnings are considered indefinitely reinvested and it is not practicable to estimate, within any reasonable range, the additional taxes that may be payable on the potential distribution of the portion of the undistributed earnings considered indefinitely reinvested.
The reconciliation of the beginning and ending amount of gross unrecognized tax benefits was as follows (in millions):
Year Ended July 31,
202620252024
Balance as of beginning of year$22.0 $20.8 $15.0 
Additions for tax positions of the current year4.5 3.3 2.8 
Additions for tax positions of prior years— 0.6 6.2 
Reductions for tax positions of prior years(0.3)— (0.1)
Changes in judgment(0.7)— — 
Settlements(1.0)— — 
Reductions due to lapse of applicable statute of limitations(2.4)(2.7)(3.1)
Balance as of end of year$22.1 $22.0 $20.8 
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes in the Consolidated Statements of Earnings. As of July 31, 2026 and 2025, accrued interest and penalties on a gross basis were $2.5 million and $2.7 million, respectively. During the year ended July 31, 2026, the Company recognized interest expense, net of tax benefit, of $0.7 million. If the Company were to prevail on all unrecognized tax benefits recorded, substantially all the unrecognized tax benefits would benefit the effective tax rate.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The U.S. Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through fiscal 2022. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before fiscal 2021.
The Company believes it is remote that any adjustment necessary to the reserve for income taxes for the next 12 months will be material. However, it is possible the ultimate resolution of audits or disputes may result in a material change to the Company’s reserve for income taxes, although the quantification of such potential adjustments cannot be made at this time.