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Income Taxes | 9 Months Ended
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Feb. 28, 2019
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 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 our fiscal 2019 third quarter, we completed our assessment of the accounting for the impact of Act, which included analysis based on related legislative updates and technical interpretations of the Act. As a result, and consistent with SAB 118, during the three months ended February 28, 2019 we recorded a net discrete income tax benefit of $8.1 million, which was comprised of a $6.3 million benefit for the re-measurement of certain U.S. deferred tax assets and liabilities and a $1.8 million benefit resulting from the reduction of the transition tax on unremitted earnings from foreign subsidiaries. No other SAB 118 adjustments for the impact of the Act were recorded this fiscal year. We have estimated the tax impact related to GILTI and FDII for the year ended May 31, 2019 and included such impact in the estimated annual effective tax rate. The impact of GILTI and FDII was not material for the nine months ended February 28, 2019. The effective income tax benefit rate of 224.7% for the three months ended February 28, 2019 compares to the effective income tax benefit rate of 17.0% for the three months ended February 28, 2018. The effective income tax benefit rate of 224.7% for the three months ended February 28, 2019 reflects variances from the 21% statutory rate due primarily to the favorable impact of $12.7 million of net discrete tax benefits recorded during the quarter and the amplified impact of those tax benefits on the relatively low level of pre-tax earnings. The $12.7 million net discrete benefits recorded are primarily comprised of the net $8.1 million benefit resulting from completion of our SAB 118 accounting for the impact of the Act and the release certain income tax reserves for uncertain tax positions. The 17.0% effective income tax benefit rate for the three months ended February 28, 2018 reflects variances from the blended fiscal year 2018 statutory rate of 29.2% due primarily to the cumulative favorable impact of the statutory rate reduction from 35% to 29.2% which occurred during that prior period. Additionally, the 17.0% effective income tax benefit rate reflects a $1.4 million discrete tax benefit related to an adjustment to the net provisional estimate of the Act as recorded in the prior period and consistent with SAB 118. The effective income tax rate of 17.8% for the nine months ended February 28, 2019 compares to the effective income tax rate of 15.3% for the nine months ended February 28, 2018. The effective income tax rate for the nine months ended February 28, 2019 reflects variances from the 21% statutory rate due primarily to $16.5 million of net discrete tax benefits, which are comprised of the $12.7 million net tax benefit described above with the remaining balance being recorded in the prior quarters of this fiscal year. These discrete tax benefits were partially offset primarily by the unfavorable impact of state and local taxes and incremental valuation allowances associated with certain foreign net operating losses. The effective income tax rate for the nine months ended February 28, 2018 reflects variances from the 29.2% statutory rate primarily due to $27.0 million in discrete tax benefits recorded in connection with foreign tax credit planning and the implementation of a foreign legal entity restructuring and corresponding planning strategy. 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 the remittance of $549.8 million of foreign earnings that are not considered to be permanently reinvested. As of February 28, 2019, the amount of these earnings have been modified to approximately $423.4 million and the related deferred tax liability, which represents the estimated tax cost to repatriate these earnings, was adjusted to $19.2 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 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 February 28, 2019. 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 remitted 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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