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INCOME TAX | 6 Months Ended
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Feb. 28, 2019
Income Tax Disclosure [Abstract] |
Income tax | NOTE 12. INCOME TAX For the three and six months ended February 28, 2019, the Company's effective tax rates of 54.9% and 40.9%, respectively, were greater than the U.S. statutory income tax rate of 21.0%. The effective tax rate is determined by computing the estimated annual effective tax rate, adjusted for discrete items, if any, which are taken into account in the appropriate period. Items that impacted the effective tax rates included:
i. | a global intangible low-taxed income (“GILTI”) tax;
ii. | a valuation allowance on foreign tax credits from the one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries as a result of the Tax Cuts and Jobs Act ("TCJA");
iii. | an uncertain tax position related to the one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries as a result of the TCJA;
iv. | non-deductible compensation expense; and
v. | state and local taxes.
For the three and six months ended February 28, 2018, the Company's effective tax rates of 15.0% and 19.6%, respectively, were lower than the blended U.S. statutory income tax rate of 25.7%. Items that impacted the effective tax rate included:
i. | the one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries with associated foreign tax credits as a result of the TCJA;
ii. | the remeasurement of the Company’s deferred tax balances to the applicable reduced statutory income tax rates as a result of the TCJA;
iii. | a permanent tax benefit related to a worthless stock deduction from the reorganization and exit of the steel trading business headquartered in the United Kingdom;
iv. | the proportion of the Company's global income from operations in jurisdictions with lower statutory tax rates than the U.S., including Poland, which has a statutory income tax rate of 19.0%;
v. | a permanent tax benefit recorded for stock awards that vested during the first and second quarters of fiscal 2018; and
vi. | a non-taxable gain on assets related to the Company's non-qualified benefits restoration plan.
For the three months ended February 28, 2018, the Company's income tax benefit from discontinued operations was immaterial. For the six months ended February 28, 2018, the Company’s effective income tax rate from discontinued operations of 36.6% was greater than the blended U.S. statutory income tax rate of 25.7%, primarily as a result of state taxes imposed on income earned by the Company’s steel trading operations headquartered in the U.S. As of February 28, 2019 and August 31, 2018, the reserve for unrecognized income tax benefits related to the accounting for uncertainty in income taxes was $6.2 million and $3.1 million, respectively, which, if recognized, would have decreased the Company’s effective income tax rate at the end of each respective period. The Company's policy classifies interest recognized on an underpayment of income taxes and any statutory penalties recognized on a tax position as income tax expense. For the three and six months ended February 28, 2019, the Company recorded immaterial amounts of accrued interest and penalties on unrecognized income tax benefits. The Company is subject to varying statutes of limitation in the U.S. and foreign jurisdictions. In the normal course of business, CMC and its subsidiaries are subject to examination by various taxing authorities. The following is a summary of tax years subject to examination: U.S. Federal — 2015 and forward U.S. States — 2015 and forward Foreign — 2012 and forward In addition, the Company is under examination by certain state revenue authorities for fiscal years 2015 through 2017. The Company believes the recorded income tax liabilities as of February 28, 2019 reflect the anticipated outcome of these examinations. On December 22, 2017, the President signed the TCJA into law. ASC 740 requires the change in tax law to be accounted for in the period of enactment. Due to complexities involved in accounting for the TCJA, the SEC's Staff Accounting Bulletin ("SAB") 118 provided a measurement period, not to extend beyond one year from the date of enactment, to complete the accounting under ASC 740. During fiscal 2018, the Company recognized an $11.0 million provisional estimate of income tax expense for the effect of those provisions of the TCJA for which amounts were reasonably estimable. In accordance with SAB 118, during the second quarter of fiscal 2019, the Company completed its assessment of the impact of the TCJA and recorded additional income tax expense of $7.6 million. The adjustment was related to an increase in the valuation allowance on foreign tax credits and an uncertain tax position related to the one-time toll charge on certain undistributed earnings of non-U.S. subsidiaries. Beginning in fiscal 2019, the Company is subject to the following provisions of the TCJA: (i) a new tax on GILTI; (ii) a new deduction for foreign-derived intangible income (“FDII”); (iii) deductibility limitations on compensation for covered employees; and (iv) deductibility limitations on business interest expense. For fiscal 2019, the Company has included in the estimated annual effective tax rate reasonable estimates of the tax impacts related to GILTI and the deductibility limitations on compensation for covered employees. The Company has elected to treat the new GILTI tax as a current period cost. The Company’s current assessment of FDII and the deductibility limitations on business interest expense did not result in an impact to the estimated annual effective tax rate. In general, it is the practice and intention of the Company to indefinitely reinvest earnings of non-U.S. subsidiaries. Based on the provisions of the TCJA, future distributions of earnings of non-U.S. subsidiaries are not expected to be subject to U.S. income tax. However, such distributions may be subject to other global income tax considerations, such as withholding taxes, but are not expected to materially impact the Company’s financial statements.

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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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