INCOME TAX (Tables)

12 Months Ended

Aug. 31, 2019

Components of earnings from continuing operations before income taxes (benefit)

The components of earnings from continuing operations before income taxes were as follows:



	Year Ended August 31,
(in thousands)	2019		2018		2017
United States	$	194,986	$	86,731	$	25,506
Foreign	73,474		78,653		39,945
Total	$	268,460	$	165,384	$	65,451

Income taxes (benefit) included in the consolidated statements of operations

The income taxes (benefit) included in the consolidated statements of earnings were as follows:



	Year Ended August 31,
(in thousands)	2019		2018			2017
Current:
United States	$	621	$	20,210		$	11,345
Foreign	14,006		18,308			9,464
State and local	2,892		2,263			2,654
Current taxes	17,519		40,781			23,463
Deferred:
United States	46,922		(11,501		)	(13,548		)
Foreign	490		(169		)	(917		)
State and local	4,908		1,002			281
Deferred taxes	52,320		(10,668		)	(14,184		)
Total income taxes on income	69,839		30,113			9,279
Income taxes (benefit) on discontinued operations	158		(34		)	(5,997		)
Income taxes on continuing operations	$	69,681	$	30,147		$	15,276

Reconciliation of the federal statutory rate to effective tax rate from continuing operations

A reconciliation of the federal statutory rate to the Company's effective income tax rate from continuing operations, including material items impacting the effective income tax rate is as follows:



	Year Ended August 31,
(in thousands)	2019			2018			2017
Federal statutory rate	21.0		%	25.7		%	35.0		%
Income tax expense at statutory rate	$	56,377		$	42,471		$	22,908
TCJA - Toll charge and related foreign tax credits	7,410			29,466			—
TCJA - Remeasurement of deferred tax balances	(586		)	(25,515		)	—
Foreign tax impairment on valuation of subsidiaries (1)	(29,697		)	22,315			(92,321		)
Gain on international restructure (1)	—			18,926			—
Change in valuation allowance	36,167			(20,839		)	113,135
Nontaxable foreign interest (1)	(9,799		)	(17,414		)	(19,259		)
Worthless stock deduction (2)	—			(6,084		)	—
Foreign rate differential (3)	(1,466		)	(5,973		)	(7,518		)
Research and experimentation credits	(580		)	(4,707		)	(1,034		)
Audit settlement (4)	120			(3,187		)	(659		)
State and local taxes	6,085			2,317			1,490
Deferred compensation (5)	(395		)	(2,036		)	(2,101		)
Section 199 manufacturing deduction	—			—			(1,407		)
Other	6,045			407			2,042
Income tax expense on continuing operations	$	69,681		$	30,147		$	15,276
Effective income tax rate from continuing operations	26.0		%	18.2		%	23.3		%

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(1)	Fully offset by a valuation allowance.


(2)	Permanent tax benefit related to a worthless stock deduction from the reorganization and exit of the Company's steel trading business headquartered in the United Kingdom.


(3)	The impact of global income from operations in jurisdictions with lower statutory tax rates than the U.S., including Poland, which has a statutory income tax rate of 19.0%.


(4)	Includes the release of certain unrecognized tax benefits for which the accruals were greater than the amount assessed.

(5)

Nontaxable gain on assets related to the Company’s nonqualified Benefit Restoration Plan ("BRP").

Tax effects of significant temporary differences giving rise to deferred tax assets and liabilities

The income tax effects of significant temporary differences giving rise to deferred tax assets and liabilities were as follows:



	Year Ended August 31,
(in thousands)	2019			2018
Deferred tax assets:
Net operating losses and credits	$	295,241		$	285,847
Deferred compensation and employee benefits	24,432			21,333
Reserves and other accrued expenses	40,296			12,704
Allowance for doubtful accounts	2,537			2,258
Inventory	8,446			974
Intangibles	480			906
Other	10,600			469
Total deferred tax assets	382,032			324,491
Valuation allowance for deferred tax assets	(283,560		)	(268,554		)
Deferred tax assets, net	98,472			55,937
Deferred tax liabilities:
Property, plant and equipment	168,701			83,879
Other	1,182			1,053
Total deferred tax liabilities	169,883			84,932
Net deferred tax liabilities	$	(71,411	)	$	(28,995	)

Reconciliation of the beginning and ending amounts of unrecognized tax benefits

reconciliation of the beginning and ending amounts of unrecognized income tax benefits is as follows:



	Year Ended August 31,
(in thousands)	2019		2018			2017
Balance at September 1	$	3,121	$	9,283		$	9,522
Change for tax positions of prior years	5,531		3,121			—
Reductions due to settlements with taxing authorities	—		(8,028		)	(239		)
Reductions due to lapse of statute of limitations	—		(1,255		)	—
Balance at August 31 (1)	$	8,652	$	3,121		$	9,283

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(1)

The full balance of unrecognized income tax benefits in each year, if recognized, would have impacted the Company’s effective income tax rate at the end of each respective year.