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Income Taxes | 12 Months Ended
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May 31, 2018
Income Taxes |
6. | Income Taxes
Income before income taxes by source consists of the following amounts:
|  | Year ended May 31 |
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
U.S. |  | $ | 62,310 |  |  | $ | 55,171 |  |  | $ | 50,662 |
Foreign |  |  | 11,155 |  |  |  | 11,502 |  |  |  | 4,851 |
|  | $ | 73,465 |  |  | $ | 66,673 |  |  | $ | 55,513 |
The provision for income taxes consisted of the following:
|  | Year ended May 31 |
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Taxes |  | $ | 10,129 |  |  | $ | 20,259 |  |  | $ | 14,630 |
Foreign |  |  | 3,066 |  |  |  | 2,514 |  |  |  | 1,756 |
Deferred |  |  | (2,945 | ) |  |  | (73 | ) |  |  | 2,589 |
Provision for Income Taxes |  | $ | 10,250 |  |  | $ | 22,700 |  |  | $ | 18,975 |
The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows:
|  | Year ended May 31 |
(in thousands) |  | 2018 |  |  | 2017 |  |  | 2016 |
Tax at U.S. statutory rate |  | $ | 21,459 |  |  | $ | 23,336 |  |  | $ | 19,429 |
Section 199 domestic production deduction |  |  | (1,167 | ) |  |  | (1,057 | ) |  |  | (1,143 | )
Foreign rate differential |  |  | (461 | ) |  |  | (1,247 | ) |  |  | (699 | )
Subpart F income |  |  | 816 |  |  |  | 996 |  |  |  | 1,049 |
Excess tax benefits on stock-based compensation |  |  | (4,816 | ) |  |  | — |  |  |  | — |
Release of FIN 48 reserve from closed tax years |  |  | (1,035 | ) |  |  | — |  |  |  | — |
Provision for state income taxes, net of federal benefit |  |  | 975 |  |  |  | 972 |  |  |  | 779 |
Remeasurement of deferred taxes |  |  | (6,022 | ) |  |  | — |  |  |  | — |
Transition tax on foreign earnings and profits |  |  | 1,223 |  |  |  | — |  |  |  | — |
Amended U.S. Federal tax returns FY12, FY13 & FY14 |  |  | — |  |  |  | — |  |  |  | (777 | )
Tax credits and other |  |  | (722 | ) |  |  | (300 | ) |  |  | 337 |
|  | $ | 10,250 |  |  | $ | 22,700 |  |  | $ | 18,975 |
On June 1, 2017, the Company adopted ASU No. 2016-09, which simplifies the accounting for share-based payments to employees. The guidance requires the recognition of the income effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-incapital pools. The guidance also allows for a policy election to account for forfeitures as they occur, rather than on an estimated basis, and requires that excess tax benefits be classified as an operating activity on the Statement of Cash Flows. The adoption of this ASU decreased income tax expense by $4.8 million in fiscal 2018. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law, making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP to situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, we have determined that the $6.0 million of deferred tax benefit recorded in connection with the remeasurement of certain deferred tax assets and liabilities and the $1.2 million of current tax expense recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings was a provisional amount at May 31, 2018. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2019 when any further analysis of our deferred tax assets and liabilities and our historical foreign earnings is completed. Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred income tax liabilities and assets are as follows:
|  | Year ended May 31 |
(in thousands) |  | 2018 |  |  | 2017 |
Deferred income tax liabilities |  |  |  |  |  |  |  |
Indefinite and long-lived assets |  | $ | (17,503 | ) |  | $ | (23,177 | )
Prepaid expenses |  |  | (573 | ) |  |  | (640 | )
|  |  | (18,076 | ) |  |  | (23,817 | )
Deferred income tax assets |  |  |  |  |  |  |  |
Stock Options |  |  | 1,489 |  |  |  | 2,604 |
Inventories and accounts receivable |  |  | 1,593 |  |  |  | 2,603 |
Tax loss carryforwards |  |  | 134 |  |  |  | 436 |
Accrued expenses and other |  |  | 757 |  |  |  | 1,126 |
|  |  | 3,973 |  |  |  | 6,769 |
Net deferred income tax liabilities |  | $ | (14,103 | ) |  | $ | (17,048 | )
We had no accrual for unrecognized tax benefits at both May 31, 2018 and 2017. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, such accruals will be reflected within income tax accounts.

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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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