INCOME TAX

12 Months Ended

Aug. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAX

NOTE 12. INCOME TAX

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

	Year Ended August 31,
(in thousands)	2021		2020		2019
United States	$	413,616	$	334,170	$	194,986
Foreign	120,402		36,608		73,474
Total	$	534,018	$	370,778	$	268,460

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

	Year Ended August 31,
(in thousands)	2021		2020		2019
Current:
United States	$	113,696	$	26,901	$	621
Foreign	25,642		7,588		14,006
State and local	19,458		7,133		2,892
Current taxes	158,796		41,622		17,519
Deferred:
United States	(10,563)		45,771		46,922
Foreign	(2,512)		(43)		490
State and local	(24,568)		5,832		4,908
Deferred taxes	(37,643)		51,560		52,320
Total income taxes on income	121,153		93,182		69,839
Income taxes on discontinued operations	—		706		158
Income taxes on continuing operations	$	121,153	$	92,476	$	69,681

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)	2021			2020			2019
Income tax expense at statutory rate	$	112,144		$	77,863		$	56,377
Change in valuation allowance	37,092			968			36,167
Foreign tax impairment on valuation of subsidiaries (1)	(29,866)			5,084			(29,697)
Global intangible low-taxed income (2)	17,263			1,252			1,541
Nontaxable foreign interest (1)	(14,617)			8			(9,799)
State and local taxes (3)	(3,838)			9,895			6,085
TCJA - Toll charge and related foreign tax credits	—			—			7,410
Other	2,975			(2,594)			1,597
Income tax expense on continuing operations	$	121,153		$	92,476		$	69,681
Effective income tax rate from continuing operations	22.7		%	24.9		%	26.0		%

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(1) Fully offset by a valuation allowance.

(2) 2021 includes the tax effect of a gain recognized in connection with a global tax restructuring.

(3) State and local taxes in 2021 includes a $19.9 million benefit related to the release of certain state valuation allowances.

The Company plans to repatriate the current and future earnings from the Europe segment and recorded an immaterial amount of tax expense related to such future distributions. The Company considers all undistributed earnings of its non-U.S. subsidiaries prior to August 31, 2019 to be indefinitely reinvested and has not recorded deferred tax liabilities on such earnings.

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

	August 31,
(in thousands)	2021		2020
Deferred tax assets:
Net operating losses and credits	$	291,145	$	283,416
Deferred compensation and employee benefits	64,693		32,293
ROU operating lease liabilities	28,915		29,619
Reserves and other accrued expenses	13,846		30,371
Other	3,817		3,315
Total deferred tax assets	402,416		379,014
Valuation allowance for deferred tax assets	(278,099)		(281,849)
Deferred tax assets, net	124,317		97,165
Deferred tax liabilities:
Property, plant and equipment	(180,925)		(185,595)
ROU operating lease assets	(26,950)		(28,201)
Other	(8,940)		(2,420)
Total deferred tax liabilities	(216,815)		(216,216)
Net deferred tax liabilities	$	(92,498)	$	(119,051)

Net operating losses giving rise to deferred tax assets consist of $428.3 million of state net operating losses and $961.6 million of foreign net operating losses that expire in varying amounts beginning in 2022 (with certain amounts having indefinite carryforward periods). These assets will be reduced as income tax expense is recognized in future periods.

The Company maintains a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. The Company's valuation allowances primarily relate to net operating loss and credit carryforwards in certain state and foreign jurisdictions for which utilization is uncertain. During fiscal 2021, the Company recorded a net $3.8 million decrease in valuation allowances. As of August 31, 2021, management determined that there is sufficient positive evidence to release $19.9 million of valuation allowances for certain state jurisdictions where deferred tax assets are now more likely than not to be realized. No change was made with respect to the realizability of foreign deferred tax assets, causing the Company to increase such valuation allowances by $17.1 million during fiscal 2021.

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

(in thousands)	2021		2020		2019
Balance at September 1,	$	8,652	$	8,652	$	3,121
Change for tax positions of prior years	—		—		5,531
Reductions due to lapse of statute of limitations	(3,121)		—		—
Balance at August 31, (1)	$	5,531	$	8,652	$	8,652

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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.

At August 31, 2021 and 2020, accrued interest and penalties related to uncertain tax positions was not material.

The Company files income tax returns in the U.S. and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, the Company and its subsidiaries are subject to examination by various taxing authorities. The following is a summary of all fiscal years that are open to examination.

U.S. Federal — 2018 and forward

U.S. States — 2017 and forward

Foreign — 2014 and forward