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Income Taxes | 12 Months Ended
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May 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 13: INCOME TAXES The components of the provision for income taxes for the years ended May 31 were as follows (in millions):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Current provision (benefit) |  |  |  |  |  |  |  |  |
Domestic: |  |  |  |  |  |  |  |  |
Federal |  | $ | 311 |  |  | $ | 199 |  |  | $ | (230 | )
State and local |  |  | 120 |  |  |  | 158 |  |  |  | 67 |
Foreign |  |  | 317 |  |  |  | 284 |  |  |  | 198 |
|  |  | 748 |  |  |  | 641 |  |  |  | 35 |
Deferred provision (benefit) |  |  |  |  |  |  |  |  |
Domestic: |  |  |  |  |  |  |  |  |
Federal |  |  | 267 |  |  |  | 667 |  |  |  | 475 |
State and local |  |  | 21 |  |  |  | 70 |  |  |  | 1 |
Foreign |  |  | 34 |  |  |  | 65 |  |  |  | (128 | )
|  |  | 322 |  |  |  | 802 |  |  |  | 348 |
|  | $ | 1,070 |  |  | $ | 1,443 |  |  | $ | 383 |
Pre-tax earnings of foreign operations for 2022, 2021, and 2020 wer e $1.4 billion, $1.8 billion, and $634 million, respectively. These amounts represent only a portion of total results associated with international shipments and do not represent our international results of operations. A reconciliation of total income tax expense and the amount computed by applying the statutory federal income tax to income before income taxes for the years ended May 31 is as follows (dollars in millions):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Taxes computed at federal statutory rate |  | $ | 1,028 |  |  | $ | 1,401 |  |  | $ | 350 |
(Decreases) increases in income tax from: |  |  |  |  |  |  |  |  |
U.S. and foreign return-to-provision adjustments |  |  | (142 | ) |  |  | — |  |  |  | — |
State and local income taxes, net of federal benefit |  | 116 |  |  |  | 179 |  |  |  | 53 |
Foreign operations |  |  | 115 |  |  |  | 138 |  |  |  | 38 |
Non-deductible expenses |  |  | 48 |  |  |  | 53 |  |  |  | 70 |
Uncertain tax positions |  |  | (18 | ) |  |  | 65 |  |  |  | (14 | )
Benefits from share-based payments |  |  | (13 | ) |  |  | (69 | ) |  |  | (5 | )
Valuation allowance |  |  | 33 |  |  |  | 14 |  |  |  | (129 | )
Foreign tax rate enactments |  |  | (30 | ) |  |  | (61 | ) |  |  | (10 | )
Benefit from U.S. tax loss carryback to prior years |  |  | — |  |  |  | (279 | ) |  |  | (71 | )
Goodwill impairment charges |  |  | — |  |  |  | — |  |  |  | 75 |
U.S. deferred tax adjustments related to foreign operations |  |  | — |  |  |  | — |  |  |  | 51 |
Other, net |  |  | (67 | ) |  |  | 2 |  |  |  | (25 | )
Provision for income taxes |  | $ | 1,070 |  |  | $ | 1,443 |  |  | $ | 383 |
Effective Tax Rate |  |  | 21.9 | % |  |  | 21.6 | % |  |  | 23.0 | %
The 2022 tax provision was favorably impacted by a benefit of $142 million related to revisions of prior year tax estimates identified during the preparation of U.S. and foreign tax returns. The 2022 tax provision was also favorably impacted by changes in our corporate legal entity structure. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) allowed a five-year carryback period for tax losses generated in 2019 through 2021. The 2021 tax provision includes a benefit of $279 million from an increase in our 2020 tax loss carried back to 2015, when the U.S. federal income tax rate was 35%. The increase in our 2020 tax loss was attributable to accelerated depreciation deductions and voluntary contributions to our tax-qualified U.S. domestic pension plans (“U.S. Pension Plans”). The 2021 tax provision also includes a benefit of $66 million from a tax rate increase in the Netherlands applied to our deferred tax asset balances and was unfavorably impacted by an increase in uncertain tax positions for matters in multiple jurisdictions. The 2020 tax provision includes a benefit of $133 million from the reduction of a valuation allowance on certain foreign tax loss carryforwards and a benefit of $71 million in connection with our estimated 2020 tax loss that the CARES Act allowed to be carried back to 2015, a tax year when the U.S. federal income tax rate was 35%. The 2020 tax provision also includes a deferred income tax expense of $51 million for a change in deferred tax balances related to future foreign tax credits from our international structure as a result of changes in legal entity forecasts during the year. The 2020 effective tax rate was negatively impacted by decreased earnings in certain non-U.S. jurisdictions. We continue to assert that both our historical and current earnings in our foreign subsidiaries are permanently reinvested and therefore no deferred taxes or withholding taxes have been provided, including deferred taxes on any additional outside basis difference (e.g., stock basis differences attributable to acquisition or other permanent differences). Our historical earnings can be repatriated to the U.S. with a de minimis tax cost. The significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions):
|  | 2022 |  |  | 2021 |
|  | Deferred Tax Assets |  |  | Deferred Tax Liabilities |  |  | Deferred Tax Assets |  |  | Deferred Tax Liabilities |
Property, equipment, leases, and intangibles |  | $ | 4,464 |  |  | $ | 10,608 |  |  | $ | 4,248 |  |  | $ | 9,731 |
Employee benefits |  |  | 1,203 |  |  |  | — |  |  |  | 1,178 |  |  |  | — |
Self-insurance accruals |  |  | 931 |  |  |  | — |  |  |  | 785 |  |  |  | — |
Other |  |  | 524 |  |  |  | 66 |  |  |  | 511 |  |  |  | 52 |
Net operating loss/credit carryforwards |  |  | 1,079 |  |  |  | — |  |  |  | 934 |  |  |  | — |
Valuation allowances |  |  | (413 | ) |  |  | — |  |  |  | (382 | ) |  |  | — |
|  | $ | 7,788 |  |  | $ | 10,674 |  |  | $ | 7,274 |  |  | $ | 9,783 |
The net deferred tax liabilities as of May 31 have been classified in the balance sheets as follows (in millions):
|  | 2022 |  |  | 2021 |
Noncurrent deferred tax assets(1) |  | $ | 1,207 |  |  | $ | 1,418 |
Noncurrent deferred tax liabilities |  |  | (4,093 | ) |  |  | (3,927 | )
|  | $ | (2,886 | ) |  | $ | (2,509 | )
(1) Noncurrent deferred tax assets are included in the line item “Other Assets” in our accompanying consolidated balance sheets. We have approximately $3.0 billion of net operating loss carryovers in various foreign jurisdictions, $1.3 billion of state operating loss carryovers, and $169 million of U.S. federal operating loss carryovers. The valuation allowances primarily represent amounts reserved for operating loss carryforwards, which expire over varying periods starting in 2023. Therefore, we establish valuation allowances if it is more likely than not that deferred income tax assets will not be realized. We believe that we will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in our consolidated balance sheets. The increase in the valuation allowance balance during 2022 includes a $21 million increase from a change in tax rate which did not impact the effective tax rate due to an offsetting increase in the related deferred tax asset. See Note 1 for more information on our policy for assessing the recoverability of deferred tax assets and valuation allowances. We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 through 2019 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur. During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit seeks to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $215 million through 2022 attributable to our interpretation of the TCJA and the Internal Revenue Code. We continue to pursue this lawsuit; however, if we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended May 31 is as follows (in millions):
|  | 2022 |  |  | 2021 |  |  | 2020 |
Balance at beginning of year |  | $ | 192 |  |  | $ | 129 |  |  | $ | 164 |
Increases for tax positions taken in the current year |  |  | 14 |  |  |  | 3 |  |  |  | 3 |
Increases for tax positions taken in prior years |  |  | 8 |  |  |  | 69 |  |  |  | 4 |
Decreases for tax positions taken in prior years |  |  | (15 | ) |  |  | (6 | ) |  |  | (10 | )
Settlements |  |  | (32 | ) |  |  | (6 | ) |  |  | (31 | )
Changes due to currency translation |  |  | 2 |  |  |  | 3 |  |  |  | (1 | )
Balance at end of year |  | $ | 169 |  |  | $ | 192 |  |  | $ | 129 |
Our liabilities recorded for uncertain tax positions include $167 million at May 31, 2022 and $190 million at May 31, 2021 associated with positions that, if favorably resolved, would provide a benefit to our income tax expense. We classify interest related to income tax liabilities as interest expense and, if applicable, penalties are recognized as a component of income tax expense. The balance of accrued interest and penalties was $55 million on May 31, 2022 and $61 million on May 31, 2021. Our consolidated statements of income for 2021 include $20 million of interest expense associated with our uncertain tax positions while interest and penalty expense for 2022 and 2020 are immaterial. It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals, or litigation in state, local, federal, and foreign tax jurisdictions, or from the resolution of various proceedings between U.S. and foreign tax authorities. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. However, estimates of the amounts or ranges for individual matters where a material change is reasonably possible cannot be made. We believe we have recorded adequate amounts of tax reserves, including interest and penalties, for any adjustments that may occur.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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