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Taxes | 12 Months Ended
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May 31, 2019
Income Tax And Non Income Tax Disclosure [Abstract] |
Taxes | TAXES The components of Earnings (loss) from continuing operations before income taxes for the fiscal years ended May 31 were:
| 2019 |  | 2018 |  | 2017
United States | $ | 8.7 |  |  | $ | (18.4 | ) |  | $ | 78.7 |
Non-United States | 17.3 |  |  | 16.9 |  |  | 9.2 |
Total | $ | 26.0 |  |  | $ | (1.5 | ) |  | $ | 87.9 |
The provision for income taxes from continuing operations for the fiscal years ended May 31 consisted of the following components:
| 2019 |  | 2018 |  | 2017
Current |  |  |  |  |  |  |  |
Federal | $ | (0.2 | ) |  | $ | (3.6 | ) |  | $ | 8.3 |
State and local | 4.8 |  |  | 0.7 |  |  | 1.8 |
Non-United States | 2.8 |  |  | 4.9 |  |  | 5.4 |
Total Current | $ | 7.4 |  |  | $ | 2.0 |  |  | $ | 15.5 |
Deferred |  |  |  |  |  |  |  |
Federal | $ | 1.1 |  |  | $ | 5.0 |  |  | $ | 17.7 |
State and local | 3.1 |  |  | (3.5 | ) |  | 2.2 |
Non-United States | (1.2 | ) |  | — |  |  | — |
Total Deferred | $ | 3.0 |  |  | $ | 1.5 |  |  | $ | 19.9 |
Total Current and Deferred | $ | 10.4 |  |  | $ | 3.5 |  |  | $ | 35.4 |
Tax Reform On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The Tax Cuts and Jobs Act, among other things, reduced the U.S. federal corporate tax rate from 35% to 21% and imposed a new minimum tax on Global Intangible Low-Taxed Income ("GILTI") earned by foreign subsidiaries. In accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which was also included in ASU No. 2018-05, Income Taxes (Topic 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“SAB 118”), which was adopted by the Company upon issuance, any adjustments of the Company's provisional tax expense are recorded as a change in estimate. During the third quarter of fiscal 2019, the Company finalized the provisional calculation resulting in a period-to-date adjustment of $0.3 to the Company’s recorded provisional tax expense, representing an expense of $0.2 in the second fiscal quarter and tax benefit of $0.5 in the third fiscal quarter. Despite the completion of the Company’s accounting for the Tax Cuts and Jobs Act under SAB 118, many aspects of the law remain unclear and the Company expects ongoing guidance to be issued at both the federal and state levels and it will continue to monitor and assess the impact of any new developments. Effective Tax Rate Reconciliation A reconciliation of the significant differences between the effective income tax rate and the federal statutory rate on Earnings (loss) from continuing operations before income taxes for the fiscal years ended May 31 was as follows:
| 2019 |  | 2018 |  | 2017
Computed federal statutory provision | 21.0 | % |  | 29.2 | % |  | 35.0 | %
State income tax provision, net of federal income tax benefit | 25.7 |  |  | 37.1 |  |  | 3.3 |
Difference in effective tax rates on earnings of foreign subsidiaries | 2.3 |  |  | (1.3 | ) |  | — |
GILTI inclusion | 3.4 |  |  | — |  |  | — |
Charitable contributions | (0.6 | ) |  | 28.6 |  |  | (0.3 | )
Tax credits | (3.1 | ) |  | 42.8 |  |  | (0.5 | )
Valuation allowances | 2.3 |  |  | 68.1 |  |  | 0.1 |
Uncertain positions | (6.3 | ) |  | 110.3 |  |  | 2.9 |
Remeasurement of deferred tax balances | — |  |  | (371.3 | ) |  | — |
Permanent differences | 0.1 |  |  | (177.6 | ) |  | (0.3 | )
Other - net | (4.8 | ) |  | 0.8 |  |  | 0.1 |
Effective tax rates | 40.0 | % |  | (233.3 | )% |  | 40.3 | %
Total provision for income taxes | $ | 10.4 |  |  | $ | 3.5 |  |  | $ | 35.4 |
The effective tax rate for the fiscal year ended May 31, 2019 was impacted by a reduction in the federal statutory rate under the Tax Cuts and Jobs Act, as the new rate was applicable to the entire current fiscal year period. The Company's income tax expense for the fiscal period includes $0.9 of expense related to GILTI, partially offset by applicable deductions and foreign tax credits. The Company's state income tax expense was primarily impacted by variations in state earnings and corresponding state net operating carryforwards. The effective tax rate for the fiscal year ended May 31, 2018 was impacted by the loss from continuing operations before income taxes of $1.5, which included a pre-tax change of $57.3 related to the settlement of the Company's domestic defined benefit pension plan. The effective tax rate was also impacted by a reduction in the federal statutory rate under the Tax Cuts and Jobs Act, for a portion of the prior fiscal year period, and the re-measurement of the Company's U.S. deferred tax balances, resulting in $5.7 of additional tax provision. Unremitted Earnings The Company assesses foreign investment levels periodically to determine if all or a portion of the Company’s investments in foreign subsidiaries are indefinitely invested. The Company is permanently reinvested in certain foreign subsidiaries representing a portion of the Company's investments in foreign subsidiaries. Any required adjustment to the income tax provision would be reflected in the period that the Company changes this assessment. As of May 31, 2019, there have been no changes to this assessment. Deferred Taxes The significant components for deferred income taxes for the fiscal years ended May 31 were as follows:
| 2019 |  | 2018
Deferred tax assets: |  |  |  |  |
Tax uniform capitalization | $ | 12.8 |  |  | $ | 9.6 |
Prepublication expenses | 1.2 |  |  | 0.7 |
Inventory reserves | 15.1 |  |  | 15.0 |
Allowance for doubtful accounts | 1.9 |  |  | 2.2 |
Deferred revenue | 23.5 |  |  | — |
Other reserves | 17.2 |  |  | 16.9 |
Postretirement, post employment and pension obligations | 6.0 |  |  | 7.1 |
Tax carryforwards | 31.8 |  |  | 26.9 |
Other - net | 13.7 |  |  | 13.7 |
Gross deferred tax assets | $ | 123.2 |  |  | $ | 92.1 |
Valuation allowance | (25.7 | ) |  | (25.1 | )
Total deferred tax assets | $ | 97.5 |  |  | $ | 67.0 |
Deferred tax liabilities: |  |  |  |  |
Prepaid expenses | (0.2 | ) |  | (0.4 | )
Depreciation and amortization | (60.3 | ) |  | (41.4 | )
Total deferred tax liability | $ | (60.5 | ) |  | $ | (41.8 | )
Total net deferred tax assets | $ | 37.0 |  |  | $ | 25.2 |
The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, duration of statutory carryforward periods, tax planning strategies and historical experience. For the fiscal year ended May 31, 2019, the valuation allowance increased by $0.6, driven by an increase to the valuation allowance of $3.9, partially offset by $3.3 of valuation allowance releases. For the fiscal year ended May 31, 2018, the valuation allowance increased by $0.3, driven by increases to the valuation allowance of $1.9, partially offset by $1.3 of valuation allowance releases and other items. For the fiscal year ended May 31, 2019, the Company has state and foreign net operating loss carryforwards of $60.0 and $117.4, respectively. Certain state net operating loss carryforwards, if not utilized, expire at various times, primarily between fiscal year 2020 and fiscal year 2039. Certain foreign net operating loss carryforwards, if not utilized, expire at various times, primarily between fiscal year 2020 and fiscal year 2025. Unrecognized tax benefits The benefits of uncertain tax positions are recorded in the financial statements only after determining a more likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities, in which case such benefits are included in long-term income taxes payable and reduced by the associated federal deduction for state taxes and non-U.S. tax credits. The interest and penalties related to these uncertain tax positions are recorded as part of the Company’s income tax expense and constitute part of Other noncurrent liabilities on the Company’s Consolidated Balance Sheets. The total amount of unrecognized tax benefits at May 31, 2019, 2018, and 2017 were $9.0, excluding $1.4 accrued for interest and penalties, $10.1, excluding $1.8 accrued for interest and penalties, and $14.1, excluding $1.7 accrued for interest and penalties, respectively. Of the total amount of unrecognized tax benefits at May 31, 2019, 2018, and 2017, $9.0, $10.1 and $14.1, respectively, would impact the Company’s effective tax rate. During the years presented, the Company recognized interest and penalties related to unrecognized tax benefits in the provision for taxes in the Consolidated Financial Statements. The Company recognized a benefit of $0.4, an expense of $0.1, and a benefit of $0.6 for the years ended May 31, 2019, 2018, and 2017, respectively. The table below presents a reconciliation of the unrecognized tax benefits for the fiscal years indicated:
Gross unrecognized benefits at May 31, 2016 | $ | 17.9 |
Decreases related to prior year tax positions | (6.3 | )
Increase related to prior year tax positions | 0.1 |
Increases related to current year tax positions | 3.0 |
Settlements during the period | (0.6 | )
Lapse of statute of limitation | — |
Gross unrecognized benefits at May 31, 2017 | $ | 14.1 |
Decreases related to prior year tax positions | (2.6 | )
Increase related to prior year tax positions | 0.4 |
Increases related to current year tax positions | 0.5 |
Settlements during the period | (1.9 | )
Lapse of statute of limitation | (0.4 | )
Gross unrecognized benefits at May 31, 2018 | $ | 10.1 |
Decreases related to prior year tax positions | (1.1 | )
Increase related to prior year tax positions | 0.2 |
Increases related to current year tax positions | 0.7 |
Settlements during the period | (0.2 | )
Lapse of statute of limitation | (0.7 | )
Gross unrecognized benefits at May 31, 2019 | $ | 9.0 |
Unrecognized tax benefits for the Company decreased by $1.1 for the year ended May 31, 2019 and decreased by $4.0 for the year ended May 31, 2018. Although the timing of the resolution and/or closure on audits is uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next twelve months. However, given the number of years remaining subject to examination and the number of matters being examined, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits. Income Tax Returns The Company, including its domestic subsidiaries, files a consolidated U.S. income tax return, and also files tax returns in various states and other local jurisdictions. Also, certain subsidiaries of the Company file income tax returns in foreign jurisdictions. The Company is routinely audited by various tax authorities and the fiscal 2015 through fiscal 2018 tax years remain open. In the current fiscal year, there were settlements of audits with taxing authorities. In the prior fiscal year, the Company reached a settlement with the Internal Revenue Service related to the audit of fiscal 2014. Non-income Taxes The Company is subject to tax examinations for sales-based taxes. A number of these examinations are ongoing and, in certain cases, have resulted in assessments from taxing authorities. The Company assesses sales tax contingencies for each jurisdiction in which it operates, considering all relevant facts including statutes, regulations, case law and experience. Where a sales tax liability in respect to a jurisdiction is probable and can be reliably estimated for such jurisdiction, the Company has made accruals for these matters which are reflected in the Company’s Consolidated Financial Statements. These amounts are included in the Consolidated Financial Statements in Selling, general and administrative expenses. Future developments relating to the foregoing could result in adjustments being made to these accruals. On June 21, 2018, the U.S. Supreme Court issued its opinion in South Dakota v. Wayfair, Inc. et. al., reversing prior precedent, in particular Quill Corp. v. North Dakota (1992), which held that states could not constitutionally require retailers to collect and remit sales or use taxes in respect to mail order or internet sales made to residents of a state in the absence of the retailer having a physical presence in the taxing state. As a result, the Company now has an obligation, at least on a going forward basis, to collect and remit sales and use taxes, primarily in respect to sales made through its school book club channel, as well as certain sales made through its ecommerce internet sites, to residents in states that the Company has not previously remitted sales or use taxes based on its having no physical presence in such states. As of May 31, 2019, the Company’s school book club channel was remitting sales taxes in 39 states. Any on-going or future litigation with states relating to sales and use taxes could be impacted favorably or unfavorably by the Court’s decision in future fiscal periods. The Company entered into a settlement with the State of Wisconsin in order to resolve legacy sales and use tax assessments for fiscal years 2003 through 2014. The Company recorded $8.1 of expense in the current fiscal year in the Overhead segment.

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- Definition Description containing the entire income tax and non-income tax disclosure. Examples 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 carry forward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carry back, and tax uncertainties information. Also, includes disclosure relating to non-income taxes such as sales based taxes etc. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. + References No definition available. + Details
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