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INCOME TAXES | 9 Months Ended
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Feb. 23, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | 11. INCOME TAXES Income tax expense for the third quarter of fiscal 2020 and 2019 was $68.9 million and $67.2 million, respectively. Income tax expense for the first three quarters of fiscal 2020 and 2019 was $141.5 million and $147.0 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 25.2% and 21.7% for the third quarter of fiscal 2020 and 2019, respectively. The effective tax rate for the first three quarters of fiscal 2020 and 2019 was 18.1% and 20.9%, respectively. The effective tax rate in the third quarter of fiscal 2020 reflects the following:
| • | additional state income tax expense related to uncertain tax positions and
| • | an adjustment of valuation allowance associated with the Wesson® oil business.
The effective tax rate for the first three quarters 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, state tax law changes, additional tax expense associated with non-deductible goodwill related to assets 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 in the third quarter of fiscal 2019 reflects the following:
| • | a benefit recognized due to the non-taxability of the novation of a legacy guarantee,
| • | a benefit recognized due to a reduction in the fair value of equity awards subject to limitations on deductibility that were issued to Pinnacle executives as replacement awards at the time of the acquisition, and
| • | an increase to the deemed repatriation tax liability.
The effective tax rate for the first three quarters 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, additional tax expense on the repatriation of foreign earnings, an adjustment of valuation allowance associated with the expected capital gains from the 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 amount of gross unrecognized tax benefits for uncertain tax positions was $46.2 million as of February 23, 2020 and $44.1 million as of May 26, 2019. Included in those amounts was $8.5 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 $8.1 million and $11.7 million as of February 23, 2020 and May 26, 2019, respectively. The net amount of unrecognized tax benefits at February 23, 2020 and May 26, 2019 that, if recognized, would impact the Company's effective tax rate was $32.4 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 $20.9 million over the next twelve months due to various federal, state, and foreign audit settlements and the expiration of statutes of limitations. As of February 23, 2020 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 $688.9 million and $687.1 million, respectively, to reflect the uncertainty regarding the ultimate realization of the tax asset. Federal capital loss carryforwards related to the Private Brands divestiture will expire in fiscal 2021. 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. In response to the COVID-19 outbreak, legislation concerning taxes has been passed in March 2020. While we are still assessing the impact of the legislation, we do not expect there to be a material impact to our consolidated financial statements at this time.

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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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