|9 Months Ended|
Feb. 28, 2018
|Income Taxes [Abstract]|
Note M: Income Taxes
The Company’s effective income tax rate was 11.7% and 34.2% for the three months ended February 28, 2018 and February 28, 2017, respectively, and 27.7% and 34.1% for the nine months ended February 28, 2018 and February 28, 2017, respectively. The effective income tax rates for the three and nine months ended February 28, 2018 were significantly impacted by the enactment of the Tax Act. In addition, the effective income tax rates in these periods were impacted by the recognition of a net discrete tax benefit related to employee stock-based compensation payments.
The Tax Act makes broad and complex changes to U.S. Federal corporate income taxation including, but not limited to: (i) reducing the corporate tax rate from 35% to 21% (a blended statutory tax rate of 29.2% for fiscal 2018); (ii) creating new or furthering limitations to the deductibility of officer compensation, interest, meals, entertainment and other expenses; and (iii) changing from a worldwide to a territorial taxation system. In December 2017, the staff of the SEC issued guidance under Staff Accounting Bulletin (“SAB”) No. 118, “Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” allowing taxpayers to record provisional amounts for reasonable estimates when they do not have the necessary information available, prepared or analyzed in reasonable detail to complete their accounting for certain income tax effects of the Tax Act. The SEC also issued rules that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the related tax impacts.
As a result of the Tax Act, the Company recorded estimated tax benefits of $56.9 million, including a one-time net tax benefit of $20.8 million related to the revaluation of the Company’s net deferred tax liabilities and a net tax benefit of $36.1 million recognized in the third quarter related to the change in the Company’s annual effective income tax rate for fiscal 2018 applied to income before taxes for the first six months of fiscal 2018. These amounts totaled $0.06 per diluted share and $0.10 per diluted share, respectively. This analysis is complete except for provisional amounts that were determined in accordance with SAB No. 118 related to certain equity compensation arrangements. Further Internal Revenue Service guidance related to whether these compensation arrangements meet the transition rule under the Tax Act is expected to be released within the next nine months and any change to the provisional amounts as a result of this further guidance is not anticipated to be material.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef