Income Taxes
 12 Months Ended
Oct. 31, 2012
Income Tax Disclosure [Abstract]  
Income Taxes

17. Income Taxes

 

The provision for income taxes for the years ended October 31, 2012, 2011 and 2010 consists of the following:

        
 (in thousands) 2012 2011 2010
 Current:      
  Federal$ 134,027$ 88,051$ 124,526
  State  19,836  13,925  18,241
 Deferred:      
  Federal  (9,861)  48,091  (13,981)
  State  (1,617)  6,777  (2,523)
 Total$ 142,385$ 156,844$ 126,263

Deferred income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts and tax bases of the Company's assets and liabilities. The significant components of deferred income taxes are as follows:

 (in thousands) 2012 2011
       
 Deferred tax assets:    
  Stock-based compensation$73,467$67,190
  Deferred rent 4,807 4,874
  Compensation and benefit expense 3,800 3,077
  Federal benefit of unrecognized state tax benefits 3,545 3,554
  Unrealized losses on derivative instruments 772 929
  Differences between book and tax bases of investments  - 5,763
  Other 192 403
 Total deferred tax asset$86,583$85,790
       
 Deferred tax liabilities:    
  Deferred sales commissions$(7,376)$(10,624)
  Compensation and benefit expense (5,560) (10,909)
  Differences between book and tax bases of goodwill    
   and intangibles (15,818) (16,075)
  Unrealized net holding gains on investments (3,303) (1,873)
  Differences between book and tax bases of property (3,268) (4,966)
  Differences between book and tax bases of investments (24)  -
 Total deferred tax liability$(35,349)$(44,447)
 Net deferred tax asset$51,234$41,343

No valuation allowance has been recorded for deferred tax assets reflecting management's belief that all deferred tax assets will be utilized.

 

The following table reconciles the Company's effective tax rate from the U.S. federal statutory tax rate to such amount for each of the years ended October 31, 2012, 2011 and 2010:

  201220112010
        
 Federal statutory rate 35.0% 35.0% 35.0%
 State and local income tax, net of      
  federal income tax benefit 3.0  3.6  3.4 
 Non-controlling interest (3.6)  1.6  (0.9) 
 Stock-based compensation 0.5  0.6  0.9 
 Release of liabilities associated with      
  uncertain tax positions -  -  (0.1) 
 Other 0.4  0.3  0.3 
 Effective income tax rate 35.3% 41.1% 38.6%

The exercise of non-qualified stock options resulted in a reduction of taxes payable of approximately $8.6 million, $7.0 million and $10.8 million for the years ended October 31, 2012, 2011 and 2010, respectively. Such benefit has been reflected as a component of shareholders' equity.

 

During fiscal 2011, the Company received approval from the Internal Revenue Service to change the Company's tax accounting for certain closed-end fund expenses. This change in tax accounting allows for the immediate tax deduction of current year closed-end fund expenses, as well as a tax deduction in the Company's fiscal 2010 tax return for previously deferred expenses. This change in accounting resulted in a decrease of deferred tax assets and a corresponding decrease in taxes payable of $94.7 million. In conjunction with the approval of the change in tax accounting, the Company filed for and received a refund of $85.0 million in fiscal 2011.

 

The changes in gross unrecognized tax benefits for the years ended October 31, 2012, 2011 and 2010 are as follows:

 (in thousands) 2012 2011 2010
 Beginning Balance$ 9,474$ 9,474$ 9,975
  Additions for tax provisions of prior years  31  -  245
  Reductions for tax provisions of prior years  -  -  (771)
  Additions based on tax provisions related to current year  33  -  30
  Reductions for settlements with taxing authorities  -  -  (5)
 Ending Balance $ 9,538$ 9,474$ 9,474

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