Note 15 - Income Taxes

9 Months Ended

May 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

15.

       INCOME TAXES

On

December 22, 2017,

the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act, or Tax Reform Act. The Tax Reform Act makes broad and complex changes to the U.S. tax code that will affect the Company’s fiscal year ending

August 31 2018,

including, but

not

limited to, reducing the U.S. federal corporate tax rate from

35%

to

21%

effective

January 1, 2018,

generally eliminating U.S. federal income taxes on dividends received from foreign subsidiaries and joint ventures after

December 31, 2017,

and imposing a

one

-time deemed repatriation tax on certain unremitted earnings of foreign subsidiaries and joint ventures. The Company will be subject to a blended U.S. federal tax rate of

25.7%

for the fiscal year ending

August 31, 2018

as a result of the reduction of the U.S. federal corporate tax rate from

35%

to

21%

effective

January 1, 2018.

The Company recognized the income tax effects of the Tax Reform Act in its

2018

interim consolidated financial statements in accordance with SAB

No.

118,

which provides SEC staff guidance for the application of ASC Topic

740,

Income Taxes

, in the reporting period in which the Tax Reform Act was signed into law. As such, the Company’s financial results reflect the income tax effects of the Tax Reform Act for which the accounting under ASC Topic

740

is complete and provisional amounts for those specific income tax effects of the Tax Reform Act for which the accounting under ASC Topic

740

is incomplete but a reasonable estimate could be determined.

The Company recorded income tax expense during the

three

and

nine

months ended

May 31, 2018

of

$181,683

and

$1,128,583,

respectively, compared to

$237,801

and

$480,423

for the

three

and

nine

months ended

May 31, 2017.

The Company measures deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Company’s deferred tax assets and liabilities were re-measured to reflect the reduction in the U.S. corporate income tax rate from

35%

to

21%

effective

January 1, 2018,

resulting in an increase of

$700,000

in income tax expense for the

nine

months ended

May 31, 2018

and a corresponding decrease of

$700,000

in net deferred tax assets as of

May 31, 2018

compared to

August 31, 2017.

The

$700,000

income tax expense and corresponding decrease in net deferred tax assets represents a provisional estimate based on the Company’s current interpretation of the Tax Reform Act and

may

change as the Company receives additional clarification and implementation guidance.

No

changes were recorded during the

three

months ended

May 31, 2018.

The

one

-time deemed repatriation tax is applicable to the unremitted earnings of the Company’s foreign subsidiaries and joint ventures. The Company calculated deemed repatriation tax of

$489,000,

which the Company expects to fully offset with foreign tax credit carryforwards for which the Company has

not

previously recognized a tax benefit. As a result, the transition tax resulted in

zero

increase in income tax expense and income taxes payable for the

nine

months ended

May 31, 2018.

The

$489,000

transition tax on deemed repatriation of unremitted foreign earnings represents a provisional estimate and is subject to adjustment during the measurement period of up to

one

year following the

December 2017

enactment date of the Tax Reform Act, as provided by recent SEC guidance.

No

adjustments were recorded during the

three

months ended

May 31, 2018.

The Company continues to analyze the impact of other provisions of the Tax Reform Act on its financial statements and operations, including the impact of the global intangible low-taxed income (GILTI) rules, and the impact of the Tax Reform Act on the Company’s indefinite reinvestment assertion with respect to the undistributed earnings of certain foreign subsidiaries and joint ventures. Any additional impacts from the enactment of the Tax Reform Act will be recorded as they are identified during the measurement period as provided for in accordance with SAB

No.

118.