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Income Taxes | 12 Months Ended
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Aug. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The provision for (benefit from) income taxes for the years ended August 31, 2019, 2018 and 2017 is as follows:
| 2019 |  | 2018 |  | 2017
| (Dollars in thousands)
Current: |  |  |  |  |
Federal | $ | 211 |  |  | $ | 15,576 |  |  | $ | 8,394 |
State | 3,815 |  |  | 7,041 |  |  | (1,787 | )
Foreign | (2,630 | ) |  | 20,268 |  |  | 6,736 |
Total Current | 1,396 |  |  | 42,885 |  |  | 13,343 |
Deferred: |  |  |  |  |
Federal | (4,923 | ) |  | (146,780 | ) |  | (173,184 | )
State | (8,491 | ) |  | (127 | ) |  | (13,244 | )
Foreign | (438 | ) |  | (54 | ) |  | (8,039 | )
Total Deferred | (13,852 | ) |  | (146,961 | ) |  | (194,467 | )
Total | $ | (12,456 | ) |  | $ | (104,076 | ) |  | $ | (181,124 | )
Domestic income before income taxes was $825.7 million, $717.4 million and $158.5 million for the years ended August 31, 2019, 2018 and 2017, respectively. Foreign loss before income taxes was $3.1 million, $46.2 million and $268.7 million for the years ended August 31, 2019, 2018 and 2017, respectively. On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act") was enacted into law. The Tax Act provides for significant U.S. tax law changes that reduced our federal corporate statutory tax rate from 35% to 21% as of January 1, 2018. As a fiscal year-end taxpayer, our annual statutory federal corporate tax rate applicable to fiscal 2018 was a blended rate of 25.7%. For fiscal 2019, the annual statutory federal corporate tax rate was 21%. The Tax Act initially repealed the Domestic Production Activities Deduction ("DPAD") and enacted the Deduction for Qualified Business Income of Pass-Thru Entities ("QBI Deduction"); however, the Consolidated Appropriations Act, 2018 ("Appropriations Act") enacted into law on March 23, 2018, impacted these deductions. The Appropriations Act modifies the QBI Deduction under Section 199A of the Tax Act to reenact DPAD for agricultural and horticultural cooperatives as it existed prior to enactment of the Tax Act and modifies the QBI Deduction available to cooperative patrons as enacted by the Tax Act. All references to the Tax Act below include modifications introduced by the Appropriations Act. Deferred taxes are comprised of basis differences related to investments, accrued liabilities and certain federal and state tax credits. Deferred tax assets and liabilities as of August 31, 2019 and 2018, are as follows:
| 2019 |  | 2018
| (Dollars in thousands)
Deferred tax assets: |  |  |  |  |
Accrued expenses | $ | 62,245 |  |  | $ | 138,417 |
Postretirement health care and deferred compensation | 42,747 |  |  | 41,797 |
Tax credit carryforwards | 152,347 |  |  | 154,240 |
Loss carryforwards | 136,435 |  |  | 104,519 |
Nonqualified equity | 290,447 |  |  | 178,046 |
Major maintenance | — |  |  | 5,484 |
Other | 97,071 |  |  | 83,580 |
Deferred tax assets valuation reserve | (246,344 | ) |  | (230,373 | )
Total deferred tax assets | 534,948 |  |  | 475,710 |
Deferred tax liabilities: |  |  |  |  |
Pension | 11,237 |  |  | 19,397 |
Investments | 99,838 |  |  | 98,608 |
Major maintenance | 4,679 |  |  | — |
Property, plant and equipment | 560,334 |  |  | 513,238 |
Other | 1,760 |  |  | 26,828 |
Total deferred tax liabilities | 677,848 |  |  | 658,071 |
Net deferred tax liabilities | $ | 142,900 |  |  | $ | 182,361 |
We have total gross loss carryforwards of $626.4 million, of which $363.6 million will expire over periods ranging from fiscal 2020 to fiscal 2041. The remainder will carry forward indefinitely. Based on estimates of future taxable profits and losses in certain foreign tax jurisdictions, as well as consideration of other factors, we assessed whether a valuation allowance was necessary to reduce specific foreign loss carryforwards to amounts we believe are more likely than not to be realized as of August 31, 2019. If our estimates prove inaccurate, adjustments to the valuation allowances may be required in the future with gains or losses being charged to income in the period such determination is made. During fiscal 2019, valuation allowances related to foreign operations decreased by $15.1 million due to net operating loss carryforwards and other timing differences. McPherson refinery's gross state tax credit carryforwards for income tax were approximately $123.3 million and $121.6 million as of August 31, 2019 and 2018, respectively. During the year ended August 31, 2019, the valuation allowance for the McPherson refinery increased by $0.8 million, net of federal tax, due to a change in the amount of state tax credits that will be available for use and estimated to be utilized. McPherson refinery's valuation allowance on Kansas state credits is necessary due to the limited amount of taxable income generated in Kansas by the combined group on an annual basis. Our foreign tax credit of $11.2 million was generated in fiscal 2018 and will expire in 10 years. Our alternative minimum tax credit of $14.1 million will not expire. Our general business credits of $79.3 million, comprised primarily of low-sulfur diesel credits, will begin to expire on August 31, 2027, and our state tax credits of $123.0 million began to expire on August 31, 2019. As of August 31, 2019 and 2018, net deferred tax assets of $0.1 million and $0.4 million, respectively, were included in other assets. The reconciliation of the statutory federal income tax rates to the effective tax rates for the years ended August 31, 2019, 2018 and 2017 is as follows:
| 2019 |  | 2018 |  | 2017
Statutory federal income tax rate | 21.0 | % |  | 25.7 | % |  | 35.0 | %
State and local income taxes, net of federal income tax benefit | (0.7 | ) |  | 0.7 |  |  | 12.1 |
Patronage earnings | (14.3 | ) |  | (13.6 | ) |  | 91.7 |
Domestic production activities deduction | (9.9 | ) |  | (8.4 | ) |  | 30.5 |
Export activities at rates other than the U.S. statutory rate | 0.2 |  |  | 6.1 |  |  | 51.6 |
U.S. tax reform | — |  |  | (23.2 | ) |  | — |
Intercompany transfer of business assets | — |  |  | (6.1 | ) |  | — |
Increase in unrecognized tax benefits | 0.2 |  |  | 6.8 |  |  | — |
Valuation allowance | 0.3 |  |  | (3.4 | ) |  | (77.1 | )
Tax credits | 0.4 |  |  | 0.7 |  |  | 22.8 |
Crack spread contingency | — |  |  | — |  |  | 4.8 |
Other | 1.3 |  |  | (0.8 | ) |  | (7.0 | )
Effective tax rate | (1.5 | )% |  | (15.5 | )% |  | 164.4 | %
Primary drivers of the fiscal 2019 income tax benefit are retaining the current DPAD benefit and deducting previously disallowed DPAD available from the carryback of excise tax credits, which were partially offset by an increase in our unrecognized deferred tax benefit as described below. Primary drivers of the fiscal 2018 income tax benefit were recognition of deferred benefits from revaluation of our net deferred tax liability resulting from the Tax Act, an intercompany transfer of a business on December 1, 2017, and a current tax benefit from retaining a significant portion of the DPAD, which were partially offset by deferred tax expense from an increase in our unrecognized tax benefit as described below. Components of the income tax benefit disclosed as a percentage of income (loss) before income taxes in the reconciliation of the statutory federal income tax rate for the year ended August 31, 2017, were magnified because our fiscal 2017 income tax benefit was unusually large in relation to our income (loss) before income taxes. Primary drivers of the fiscal 2017 income tax benefit were recognition of deferred tax benefits related to the issuance of non-qualified equity certificates for fiscal 2013 and 2014, which is disclosed within "Patronage earnings" and U.S. and Brazil deductions related to a Brazilian trading partner loss, which are disclosed within "Statutory federal income tax rate" and "Export activities at rates other than the U.S. statutory rate," respectively, as well as a current tax benefit from retaining a significant portion of the DPAD. A significant income tax expense within the fiscal 2017 income tax benefit is an increase in the valuation allowance against deferred tax assets generated in a Brazilian trading partner loss and Kansas state tax credits. We file income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. In addition to the current year, fiscal 2007 through 2018 remain subject to examination, at least for certain issues. We account for our income tax provisions in accordance with ASC Topic 740, Income Taxes, which prescribes a minimum threshold a tax provision is required to meet before being recognized in our consolidated financial statements. This interpretation requires us to recognize in our consolidated financial statements tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the position. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods presented follows:
| 2019 |  | 2018 |  | 2017
| (Dollars in thousands)
Balance at beginning of period | $ | 91,135 |  |  | $ | 37,830 |  |  | $ | 37,105 |
Additions attributable to current year tax positions | 14,162 |  |  | 3,640 |  |  | 725 |
Additions attributable to prior year tax positions | — |  |  | 49,665 |  |  | — |
Reductions attributable to prior year tax positions | (4,169 | ) |  | — |  |  | — |
Balance at end of period | $ | 101,128 |  |  | $ | 91,135 |  |  | $ | 37,830 |
During fiscal 2019, we increased our unrecognized tax benefits as a result of proposed tax regulations related to DPAD and decreased our unrecognized tax benefits for excise tax credits related to blending and sales of renewable fuels deducted from income taxes. During fiscal 2018, adverse judicial opinions received by other taxpayers with similar filing positions resulted in an increase to our unrecognized tax benefits primarily for excise tax credits related to blending and sales of renewable fuels deducted from income taxes. During fiscal 2017, we increased our unrecognized tax benefits for excise tax credits related to blending and sales of renewable fuels deducted from income taxes. If we were to prevail on all positions taken in relation to uncertain tax positions, $93.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate. However, we do not believe it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. We recognized $1.7 million and $1.2 million for interest and penalties related to unrecognized tax benefits in our Consolidated Statement of Operations for the year ended August 31, 2019 and 2018, respectively, and a related $2.9 million and $1.2 million interest payable on our Consolidated Balance Sheet as of August 31, 2019 and 2018, respectively. No interest or penalties were recognized in our Consolidated Statements of Operations for the year ended August 31, 2017, and no interest payable was recorded on our Consolidated Balance Sheet as of August 31, 2017.

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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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