Income Taxes |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Nov. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes |
Note 12. Income Taxes
The Company's income tax expense or benefit is impacted by a number of factors, including the amount of taxable earnings generated in foreign jurisdictions with tax rates that are lower than the U.S. federal statutory rate, permanent items, state tax rates and the ability to utilize various tax credits and net operating loss carryforwards. The Company's global operations, acquisition activity and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Both fiscal 2018 and 2017 include the benefits of tax planning initiatives. Comparative earnings before income taxes, income tax expense (benefit) and effective income tax rates are as follows (amounts in thousands):
Both the current and prior year effective income tax rates were impacted by the proportion of earnings in foreign jurisdictions with income tax rates lower than the U.S. federal income tax rate and the amount of income tax benefits from tax planning initiatives. The Company's earnings before income taxes included approximately 80% of earnings from foreign jurisdictions for both the estimated full-year fiscal 2018 and fiscal 2017. This foreign income tax rate differential had the effect of reducing the 35% U.S. statutory tax rate by 12.2% and 22.4%, for the three months ended November 30, 2017 and 2016, respectively. In addition to tax planning initiatives (which yield an effective income tax rate lower than the federal income tax rate) in each year, the income tax benefit for the three months ended November 30, 2016 included a $2.9 million benefit related to the discrete director and officer transition costs. These factors, combined with year-to-date activity, yielded an income tax expense (benefit) of 23.5% and (152.4)% for the three months ended November 30, 2017 and 2016, respectively. The tax benefits related to tax planning initiatives are not expected to repeat in future periods due to certain tax attributes that are no longer available and subsequent changes in relevant tax laws. The Company may release a material valuation allowance in a foreign jurisdiction in late fiscal 2018 or in fiscal 2019, if the jurisdiction demonstrates sustained profitability and the Company determines that it is more likely than not the deferred tax assets will be realized.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Act”) was signed. The Act significantly changes the income tax environment for US multinational corporations. The Company is actively evaluating the corporate income tax provisions of the Act including the reduction in the US corporate income tax rate, limitation on deductibility of interest, repatriation of foreign earnings, the move to a territorial tax system, and other provisions. Due to the complexity of the Act, the Company will continue to assess the provisions as well as any prospectively released regulations and disclose the anticipated impact to income tax expense resulting from the Act in future filings.
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