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INCOME TAXES | 6 Months Ended
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Nov. 24, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | 11. INCOME TAXES Income tax expense for the second quarter of fiscal 2020 and 2019 was $84.1 million and $22.4 million, respectively. Income tax expense for the first half of fiscal 2020 and 2019 was $72.6 million and $79.8 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 24.3% and 14.3% for the second quarter of fiscal 2020 and 2019, respectively. The effective tax rate for the first half of fiscal 2020 and 2019 was 14.3% and 20.3%, respectively. The effective tax rate in the second quarter of fiscal 2020 reflects the following:
| • | additional tax expense associated with non-deductible goodwill related to assets held for sale, for which an impairment charge was recognized,
| • | a benefit from statute lapses on tax issues that were previously reserved, and
| • | an income tax benefit associated with a deduction of a prior year federal income tax matter.
The effective tax rate for the first half of fiscal 2020 reflects the above-cited items, as well as the impact of benefits from the settlement of tax issues that were previously reserved, a change in deferred state tax rates due to the integration of Pinnacle activity for tax purposes, a tax planning strategy that will allow utilization of certain state attributes, and state tax law changes. The effective tax rate in the second quarter of fiscal 2019 reflects the following:
| • | the impact of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), including a reduction in the statutory federal income tax rate to 21%, partially offset by the repeal of the deduction for domestic manufacturing activities, changes in deductibility of executive compensation and the effect of the global intangible low-tax income inclusion,
| • | a reduction to the deemed repatriation tax liability and an additional benefit from the revaluation of deferred tax assets and liabilities under the Tax Act,
| • | income tax expense related to a change in estimate of the income tax expense on undistributed foreign earnings for which the indefinite reinvestment assertion is no longer made,
| • | an adjustment of valuation allowance associated with the expected capital gains from the planned divestiture of the Wesson® oil business,
| • | additional tax expense on non-deductible facilitative costs associated with the acquisition of Pinnacle, and
| • | additional income tax expense related to state taxes.
The effective tax rate for the first half of fiscal 2019 reflects the above-cited items, as well as the impact of foreign restructuring resulting in a benefit related to undistributed foreign earnings for which the indefinite reinvestment assertion is no longer made, and additional tax expense on the repatriation of foreign earnings. The amount of gross unrecognized tax benefits for uncertain tax positions was $36.8 million as of November 24, 2019 and $44.1 million as of May 26, 2019. Included in those amounts was $0.8 million and $1.0 million, respectively, for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The gross unrecognized tax benefits excluded related liabilities for gross interest and penalties of $7.3 million and $11.7 million as of November 24, 2019 and May 26, 2019, respectively. The net amount of unrecognized tax benefits at November 24, 2019 and May 26, 2019 that, if recognized, would impact the Company's effective tax rate was $31.0 million and $37.3 million, respectively. Included in those amounts is $6.7 million that would be reported in discontinued operations. Recognition of these tax benefits would have a favorable impact on the Company's effective tax rate. We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $12.9 million over the next twelve months due to various federal, state, and foreign audit settlements and the expiration of statutes of limitations. As of November 24, 2019 and May 26, 2019, we had a deferred tax asset of $688.9 million and $687.1 million, respectively, that was generated from the capital loss realized on the sale of the Private Brands operations with corresponding valuation allowances of $687.9 million and $687.1 million, respectively, to reflect the uncertainty regarding the ultimate realization of the tax asset. During the second quarter of fiscal 2020, the valuation allowance was adjusted by $0.9 million due to the expected capital gains from a planned divestiture. We have not provided any deferred taxes on undistributed earnings of our foreign subsidiaries. Deferred taxes will be provided for earnings of non-U.S. affiliates and associated companies when we determine that such earnings are no longer indefinitely reinvested and will result in a tax liability upon distribution.

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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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