INCOME TAXES	9 Months Ended
Feb. 26, 2017
INCOME TAXES
INCOME TAXES	4. INCOME TAXES For periods ended on or prior to the Separation Date, we were a member of Conagra’s consolidated group and our U.S. taxable income was included in the consolidated U.S. federal income tax return of Conagra as well as in returns filed by Conagra with certain state and local taxing jurisdictions. Our foreign income tax returns are filed on a separate company basis. For periods prior to the Separation Date, our income tax liability was computed and presented herein under the “separate return method” as if we were a separate tax paying entity. In connection with the Separation, we entered into various agreements with Conagra that govern the relationship between the parties going forward, including a tax matters agreement. Under the tax matters agreement, Conagra is generally responsible for all taxes associated with consolidated federal and state filings (and will be entitled to all related refunds of taxes) imposed on Conagra and its subsidiaries (including subsidiaries that were transferred to Lamb Weston at Separation) with respect to the taxable periods (or portions thereof) ended on or prior to November 9, 2016. Also, pursuant to this agreement, Lamb Weston is generally responsible for all taxes associated with separately filed foreign, state and local tax filings (and will be entitled to all related refunds of taxes) imposed on Lamb Weston and its subsidiaries ended on or prior to November 9, 2016. In connection with the Separation, Lamb Weston recognized a step-up in tax basis in certain assets, which resulted in a $75.0 million net decrease in deferred tax liabilities and a corresponding increase in equity. The step-up in tax basis related to a deferred intercompany transaction arising in 2008, which until the Separation Date, was eliminated within Conagra’s consolidated financial statements and federal tax filings. Income tax expense for the thirteen weeks ended February 26, 2017 and February 28, 2016, was $44.0 million and $53.2 million, respectively, and for the thirty-nine weeks ended February 26, 2017 and February 28, 2016, was $129.0 million and $124.2 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 33% in all periods presented in our Condensed Combined and Consolidated Statements of Earnings. There have been no material changes to the unrecognized tax benefits disclosed in Note 11, Pre-Tax Income and Income Taxes, of the Notes to Combined Financial Statements included in the Form 10. Income taxes paid, net of refunds, were $134.4 million and $118.8 million in the thirty-nine weeks ended February 26, 2017 and February 28, 2016, respectively.

4. INCOME TAXES

For periods ended on or prior to the Separation Date, we were a member of Conagra’s consolidated group and our U.S. taxable income was included in the consolidated U.S. federal income tax return of Conagra as well as in returns filed by Conagra with certain state and local taxing jurisdictions. Our foreign income tax returns are filed on a separate company basis. For periods prior to the Separation Date, our income tax liability was computed and presented herein under the “separate return method” as if we were a separate tax paying entity.

In connection with the Separation, we entered into various agreements with Conagra that govern the relationship between the parties going forward, including a tax matters agreement. Under the tax matters agreement, Conagra is generally responsible for all taxes associated with consolidated federal and state filings (and will be entitled to all related refunds of taxes) imposed on Conagra and its subsidiaries (including subsidiaries that were transferred to Lamb Weston at Separation) with respect to the taxable periods (or portions thereof) ended on or prior to November 9, 2016. Also, pursuant to this agreement, Lamb Weston is generally responsible for all taxes associated with separately filed foreign, state and local tax filings (and will be entitled to all related refunds of taxes) imposed on Lamb Weston and its subsidiaries ended on or prior to November 9, 2016.

In connection with the Separation, Lamb Weston recognized a step-up in tax basis in certain assets, which resulted in a $75.0 million net decrease in deferred tax liabilities and a corresponding increase in equity. The step-up in tax basis related to a deferred intercompany transaction arising in 2008, which until the Separation Date, was eliminated within Conagra’s consolidated financial statements and federal tax filings.

Income tax expense for the thirteen weeks ended February 26, 2017 and February 28, 2016, was $44.0 million and $53.2 million, respectively, and for the thirty-nine weeks ended February 26, 2017 and February 28, 2016, was $129.0 million and $124.2 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 33% in all periods presented in our Condensed Combined and Consolidated Statements of Earnings.

There have been no material changes to the unrecognized tax benefits disclosed in Note 11, Pre-Tax Income and Income Taxes, of the Notes to Combined Financial Statements included in the Form 10. Income taxes paid, net of refunds, were $134.4 million and $118.8 million in the thirty-nine weeks ended February 26, 2017 and February 28, 2016, respectively.