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Income Taxes | 9 Months Ended
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Feb. 28, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9 — INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law. The income tax effects of changes in tax laws are recognized in the period when enacted. The Act provides for numerous significant tax law changes and modifications with varying effective dates. Provisions of the Act that impact our fiscal third quarter ending February 28, 2018 include reducing the corporate income tax rate from 35% to 21%, creating a territorial tax system (with a one-time mandatory tax on previously deferred foreign earnings), broadening the tax base and allowing for immediate capital expensing of certain qualified property. The corporate tax rate reduction is effective for RPM as of January 1, 2018 and, accordingly, reduces our current fiscal year federal statutory rate to a blended rate of approximately 29.2%. The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that should not extend beyond one year from the Act’s enactment date for companies to complete the applicable accounting under ASC 740. In accordance with SAB 118 and based on the information available as of February 28, 2018, we recorded a net provisional discrete income tax benefit of $1.4 million as a result of the Act being enacted during our current quarter. The net provisional income tax benefit is comprised of a benefit of $24.1 million related to the provisional re-measurement of our U.S. deferred tax assets and liabilities at the reduced U.S. corporate tax rates and a provisional benefit of $44.1 million for the partial reversal of existing deferred tax liabilities recorded for the estimated tax cost associated with unremitted foreign earnings not considered permanently reinvested, partially offset by a $66.8 million provisional charge for the transition tax on previously deferred foreign earnings. We are estimating that the cash tax associated with the transition tax will be significantly reduced due to the utilization of existing foreign tax credits. The net provisional income tax benefit of $1.4 million is based on estimates as of the interim period ended February 28, 2018 and includes forecasts of full year fiscal 2018 results, including estimates of certain U.S. and foreign tax attributes. The re-measurement of our U.S. deferred tax assets and liabilities is provisional as we do not perform a detailed analysis of these items on an interim basis. Variances in our forecasted versus actual results will impact the provisional amount recorded for the transition tax liability. Additionally, we expect that taxing jurisdictions will issue future guidance or interpretations of the Act. These factors, as well as potential updates to our interpretations of the Act, will impact the net provisional income tax benefit recorded during this quarter. As a result, adjustments to the provisional income tax benefit will be recorded in future periods. As a result of the change to U.S. taxation of unremitted foreign earnings under the Act, we are in the process of evaluating our permanent reinvestment assertions with respect to unremitted foreign earnings. The above noted provisional deferred tax liability adjustment of $44.1 million includes our preliminary estimate, as of February 28, 2018, of our position with respect to foreign earnings not considered to be permanently reinvested. Certain provisions of the Act will first impact us starting in our fiscal 2019 year. These provisions include, but are not limited to, the base erosion anti-abuse tax, the provision designed to tax global intangible low-taxed income, and the repeal of the domestic production activities deduction. We are evaluating the impact of these provisions on future fiscal years and, accordingly, we have not made any elections related to these provisions as of February 28, 2018. The effective income tax rate was (17.0%) for the three months ended February 28, 2018. Excluding the $1.4 million provisional (benefit) described above, the effective income tax rate was (12.9%) for the three months ended February 28, 2018. The (12.9%) rate reflects the favorable cumulative impact of the U.S. fiscal 2018 statutory rate reduction from 35% to 29.2%. The effective income tax expense rate for the three months ended February 28, 2017 was 25.4%. The effective income tax rate was 15.3% for the nine months ended February 28, 2018. Excluding the $1.4 million provisional described above, the effective income tax rate was 15.8% for the nine months ended February 28, 2018. The 15.8% effective income tax rate benefit rate reflects the favorable impact of the U.S. fiscal 2018 statutory rate reduction from 35% to 29.2%. The effective income tax expense rate for the nine months ended February 28, 2017 was 4.8%. Additionally, income tax expense for the nine-month period ended February 28, 2018 reflects discrete tax benefits of $27.0 million as reported in the prior quarters of this fiscal year. Income tax expense for the nine months ended February 28, 2017 includes a favorable discrete adjustment for excess tax benefits related to equity compensation of $11.5 million. Our deferred tax liability for unremitted foreign earnings of $64.1 million as of November 30, 2017 has been adjusted to $20.0 million as of February 28, 2018. The $20.0 million deferred tax liability represents our provisional estimate of the foreign tax cost associated with our preliminary estimate of $446.0 million of foreign earnings that are not considered to be permanently reinvested. As noted above, with the change in U.S. taxation of foreign earnings, we are evaluating our position with respect to permanent reinvestment of foreign earnings based on various factors, including future liquidity needs, our global capital structure and the foreign tax implications of future earnings repatriations.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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