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Income Taxes | 6 Months Ended
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Nov. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9 — INCOME TAXES On December 22, 2017 the Tax Cuts and Jobs Act (“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. Generally, the more significant provisions of the Act that impacted us for the year ended May 31, 2018 included the reduction in the corporate income tax rate from 35% to 21%, the creation of a territorial tax system (with a one-time mandatory tax on previously deferred foreign earnings) and allowance for immediate capital expensing of certain qualified property. The corporate tax rate reduction was effective for RPM as of January 1, 2018 and, accordingly, reduced our fiscal year 2018 federal statutory rate to a blended rate of approximately 29.2%. The significant provisions of the Act which impact us for fiscal 2019 include the full federal statutory rate reduction to 21% and the repeal of the domestic production activities deduction. Also effective for our fiscal 2019 are provisions of the Act that subject us to current U.S. tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries and allows a benefit for foreign-derived intangible income (“FDII”). Subsequent to the enactment of the Act, 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 May 31, 2018, we recorded a net provisional income tax expense of $7.3 million in accordance with the applicable provisions of the Act. The net provisional income tax expense was comprised of a benefit of $15.7 million related to the provisional re-measurement of our U.S. deferred tax assets and liabilities at the reduced U.S. corporate tax rates, a provisional expense of $67.9 million for the transition tax on unremitted earnings from foreign subsidiaries, and a provisional benefit of $44.9 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. During the six months ended November 30, 2018, we have not recorded any adjustments to the provisional amounts recorded at May 31, 2018, as a result of the Act, related to the remeasurement of our U.S. deferred balances, the existing deferred tax liabilities recorded for the estimated tax cost associated with unremitted foreign earnings not considered permanently reinvested or for the transition tax on unremitted earnings from foreign subsidiaries. In all cases, we are continuing to compute and refine our estimates as additional analysis is completed, and certain tax attribute data becomes available. In addition, our estimates may also be revised as provisions of the Act are further clarified by taxing authorities. We have made sufficient progress in our calculation to reasonably estimate the tax impact related to GILTI and FDII for the year ended May 31, 2019 and included it in the estimated annual effective tax rate. The impact of GILTI and FDII was not material for the six months ended November 30, 2018. We will continue to refine our calculations, which may result in changes to the expected impact for fiscal year 2019. The effective income tax rate of 26.2% for the three-months ended November 30, 2018 compares to an effective income tax rate of 12.2% for the three-month period ended November 30, 2017. The effective tax rate for the three-months ended November 30, 2018 reflects variances from the federal statutory rate of 21% due primarily to the unfavorable impact of state and local taxes, partially offset by a favorable discrete tax adjustment for the excess tax benefits related to equity compensation. The effective income tax rate of 12.2% for the three-months ended November 30, 2017 reflects variances from the pre-tax reform federal statutory rate of 35% due to lower effective tax rates of certain of our foreign subsidiaries, the benefit of the domestic manufacturing deduction, partially offset by the unfavorable impact of state and local taxes. Additionally, during the three-months ended November 30, 2017 we recorded favorable discrete tax adjustments of $2.0 million for the excess tax benefits related to equity compensation and $18.0 million related to the implementation of a foreign legal entity restructuring and corresponding planning strategy. The effective income tax rate of 24.7% for the six-months ended November 30, 2018 compares to an effective tax rate of 19.6% for the six-months ended November 30, 2017. The effective tax rate for the six-months ended November 30, 2018 reflects variances from the federal statutory rate of 21% due primarily to the unfavorable impact of state and local taxes, partially offset by a favorable discrete tax adjustment of $4.1 million for the excess tax benefits related to equity compensation. The effective income tax rate of 19.6% for the six-months ended November 30, 2017 reflects variances from the pre-tax reform federal statutory rate of 35% due to lower effective tax rates of certain of our foreign subsidiaries, the benefit of the domestic manufacturing deduction, partially offset by the unfavorable impact of state and local taxes. Additionally, during the six-months ended November 30, 2017 we recorded favorable discrete tax adjustments of $3.5 million for the excess tax benefits related to equity compensation, $18.0 million related to the implementation of a foreign legal entity restructuring and corresponding planning strategy, and $9.0 million related to foreign tax credit planning. Our deferred tax liability for unremitted foreign earnings was adjusted to $19.9 million as of May 31, 2018. The $19.9 million deferred tax liability represented our estimate of the foreign tax cost associated with our preliminary estimate of $549.8 million of foreign earnings that are not considered to be permanently reinvested. As of November 30, 2018, the amount of these earnings has changed to approximately $419.5 million and the deferred tax liability was adjusted to $19.1 million to reflect the impact of foreign exchange. The reduction to the earnings amounts no longer permanently reinvested is due principally to distributions made during the first quarter of this this fiscal year which were not subject to foreign withholding taxes. We have not provided for foreign withholding or income taxes on the remaining foreign subsidiaries’ undistributed earnings because such earnings have been retained and reinvested by the subsidiaries as of November 30, 2018. Accordingly, no provision has been made for foreign withholding or income taxes, which may become payable if the remaining undistributed earnings of foreign subsidiaries were paid to us as dividends.

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