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Income Taxes | 12 Months Ended
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Aug. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes CHS is a nonexempt agricultural cooperative and files a consolidated federal income tax return within our tax return period. We are subject to tax on income from nonpatronage sources, nonqualified patronage distributions and undistributed patronage-sourced income. Income tax (benefit) expense is primarily the current tax payable for the period and the change during the period in certain deferred tax assets and liabilities. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized under U.S. GAAP and such amounts recognized for federal and state income tax purposes, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The (benefit from) provision for income taxes for the years ended August 31, 2020, 2019 and 2018 is as follows:
| 2020 |  | 2019 |  | 2018
| (Dollars in thousands)
Current: |  |  |  |  |
Federal | $ | 4,519 |  |  | $ | 211 |  |  | $ | 15,576 |
State | (2,231) |  |  | 3,815 |  |  | 7,041 |
Foreign | 2,748 |  |  | (2,630) |  |  | 20,268 |
Total Current | 5,036 |  |  | 1,396 |  |  | 42,885 |
Deferred: |  |  |  |  |
Federal | (36,231) |  |  | (4,923) |  |  | (146,780) |
State | (5,263) |  |  | (8,491) |  |  | (127) |
Foreign | (273) |  |  | (438) |  |  | (54) |
Total Deferred | (41,767) |  |  | (13,852) |  |  | (146,961) |
Total | $ | (36,731) |  |  | $ | (12,456) |  |  | $ | (104,076) |
Domestic income before income taxes was $324.4 million, $825.7 million and $717.4 million for the years ended August 31, 2020, 2019 and 2018, respectively. Foreign income (loss) before income taxes was $62.5 million, ($3.1) million and ($46.2) million for the years ended August 31, 2020, 2019 and 2018, respectively. 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, 2020 and 2019, are as follows:
| 2020 |  | 2019
| (Dollars in thousands)
Deferred tax assets: |  |  |
Accrued expenses | $ | 51,560 |  |  | $ | 62,245 |
Postretirement health care and deferred compensation | 42,898 |  |  | 42,747 |
Tax credit carryforwards | 123,193 |  |  | 152,347 |
Loss carryforwards | 116,741 |  |  | 136,435 |
Nonqualified equity | 344,924 |  |  | 290,447 |
Lease obligations | 64,140 |  |  | — |
Other | 85,856 |  |  | 97,071 |
Deferred tax assets valuation reserve | (219,891) |  |  | (246,344) |
Total deferred tax assets | 609,421 |  |  | 534,948 |
Deferred tax liabilities: |  |  |
Pension | 17,131 |  |  | 11,237 |
Investments | 95,916 |  |  | 99,838 |
Major maintenance | 91 |  |  | 4,679 |
Property, plant and equipment | 556,160 |  |  | 560,334 |
Right of use asset | 64,140 |  |  | — |
Other | 15,326 |  |  | 1,760 |
Total deferred tax liabilities | 748,764 |  |  | 677,848 |
Net deferred tax liabilities | $ | 139,343 |  |  | $ | 142,900 |
We have total gross loss carryforwards of $576.6 million, of which $366.9 million will expire over periods ranging from fiscal 2021 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, 2020. 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. McPherson refinery's gross state tax credit carryforwards for income tax were approximately $125.5 million and $123.3 million as of August 31, 2020 and 2019, respectively. 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. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ("CARES") Act was signed into law. As a result, our alternative minimum tax credit became refundable and has been classified in other current assets on the Consolidated Balance Sheet as of August 31, 2020. Our general business credits of $59.1 million, comprised primarily of low-sulfur diesel credits, will begin to expire on August 31, 2027, and our state tax credits of $125.5 million began to expire on August 31, 2020. The reconciliation of the statutory federal income tax rates to the effective tax rates for the years ended August 31, 2020, 2019 and 2018 is as follows:
| 2020 |  | 2019 |  | 2018
Statutory federal income tax rate | 21.0 | % |  | 21.0 | % |  | 25.7 | %
State and local income taxes, net of federal income tax benefit | (1.8) |  |  | (0.7) |  |  | 0.7 |
Patronage earnings | (13.1) |  |  | (14.3) |  |  | (13.6) |
Domestic production activities deduction | (19.0) |  |  | (9.9) |  |  | (8.4) |
Export activities at rates other than the U.S. statutory rate | 1.8 |  |  | (2.1) |  |  | 5.7 |
U.S. tax reform | — |  |  | — |  |  | (23.2) |
Intercompany transfer of business assets | (1.6) |  |  | — |  |  | (6.1) |
Increase in unrecognized tax benefits | 4.2 |  |  | 0.2 |  |  | 6.8 |
Valuation allowance | (1.0) |  |  | 2.6 |  |  | (3.0) |
Tax credits | 0.2 |  |  | 0.4 |  |  | 0.7 |
Other | (0.2) |  |  | 1.3 |  |  | (0.8) |
Effective tax rate | (9.5) | % |  | (1.5) | % |  | (15.5) | %
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 2020 and fiscal 2019, the annual statutory federal corporate tax rate was 21%. Primary drivers of the fiscal 2020 income tax benefit were retaining the current Domestic Production Activities Deduction ("DPAD") benefit and from the settlement of a U.S. federal audit resulting in additional tax credit carryovers, which were partially offset by an increase in our unrecognized deferred tax benefit. Primary drivers of the fiscal 2019 income tax benefit were 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. 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 2019 remain subject to examination, at least for certain issues. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged and we may or may not prevail. If we determine that a tax position is more likely than not to be sustained upon audit, based on the technical merits of the position, we recognize the benefit by measuring the amount that is greater than 50% likely of being realized. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) a completion of a tax audit, (ii) effective settlement of an issue, (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) expiration of the applicable statute of limitations. Significant judgment is required in accounting for tax reserves. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods presented follows:
| 2020 |  | 2019 |  | 2018
| (Dollars in thousands)
Balance at beginning of period | $ | 101,128 |  |  | $ | 91,135 |  |  | $ | 37,830 |
Additions attributable to current year tax positions | 14,410 |  |  | 14,162 |  |  | 3,640 |
Additions attributable to prior year tax positions | 6,128 |  |  | — |  |  | 49,665 |
Reductions attributable to prior year tax positions | (2,516) |  |  | (4,169) |  |  | — |
Balance at end of period | $ | 119,150 |  |  | $ | 101,128 |  |  | $ | 91,135 |
If we were to prevail on all positions taken in relation to uncertain tax positions, $111.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. We recognized $1.0 million benefit and $1.7 million expense for interest and penalties related to unrecognized tax benefits in our Consolidated Statement of Operations for the years ended August 31, 2020 and 2019, respectively, and a related $1.0 million and $2.9 million interest payable on our Consolidated Balance Sheet as of August 31, 2020 and 2019, respectively. No interest or penalties were recognized in our Consolidated Statements of Operations for the year ended August 31, 2018.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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