Pre-tax income, inclusive of equity method investment earnings, consisted of the following (dollars in millions):

Income taxes computed by applying the U.S. statutory tax rates to income from operations, including equity method earnings, and before income taxes are reconciled to the provision for income taxes set forth in the Consolidated Statements of Earnings as follows (dollars in millions):

(a)	The U.S. statutory tax rate was 21% for fiscal years 2020 and 2019. The impact of the lower U.S. statutory income tax rate from the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was phased in during fiscal 2018, resulting in a U.S. statutory tax rate of 29.3%.

(b)

In connection with the impact of the Tax Act in fiscal 2018, we recorded a $45.4 million net tax benefit from the impact of remeasuring our net U.S. deferred tax liabilities during fiscal 2018, including $5.5 million of deferred tax benefits originating during the year, with the new lower statutory tax rate. We also recorded an $11.5 million transition tax on our previously untaxed foreign earnings that is primarily payable over eight years. In fiscal 2019, we completed our analysis of the one-time impacts of the Tax Act and reduced the transition tax by $2.4 million.

(c)	The effective income tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.

Income Taxes Paid

Income taxes paid, net of refunds, were $82.5 million, $103.0 million, and $106.9 million in fiscal 2020, 2019, and 2018, respectively.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred income tax assets and liabilities were as follows (dollars in millions):


	May 31, 2020				May 26, 2019
	Assets		Liabilities		Assets		Liabilities
Property, plant and equipment	$	—	$	188.8	$	—	$	178.1
Goodwill and other intangible assets		54.9		—		64.1		—
Compensation and benefit related liabilities		19.7		—		17.8		—
Net operating loss and credit carryforwards (a)		5.2		—		15.3		—
Accrued expenses and other liabilities		15.2		—		14.2		—
Inventory and inventory reserves		4.5		—		11.5		—
Lease liabilities		36.9		—		—		—
Lease assets		—		35.4		—		—
Debt issuance costs		—		3.4		—		4.1
Investment in joint ventures		—		3.6		—		3.5
Other		7.7		8.6		12.1		8.6
		144.1		239.8		135.0		194.3
Less: Valuation allowance (b)		(54.5)		—		(64.6)		—
Net deferred taxes (c)	$	89.6	$	239.8	$	70.4	$	194.3

(a)	At May 31, 2020, Lamb Weston had approximately $20.3 million of gross ($4.6 million after-tax) foreign net operating loss carryforwards, of which the majority expire during fiscal 2021.

(b)

The valuation allowance is predominantly related to non-amortizable intangibles and the portion of the net operating loss carryforwards that we are not more likely than not to realize. The net impact on income tax expense related to changes in the valuation allowance, including net operating loss carryforwards, was zero in fiscal 2020, $1.1 million of benefit in fiscal 2019, and zero in fiscal 2018.

(c)

Deferred tax assets of $2.3 million and $1.8 million as of May 31, 2020 and May 26, 2019, respectively, were presented in “Other assets.” Deferred tax liabilities of $152.5 million and $125.7 million as of May 31, 2020 and May 26, 2019, respectively, were presented in “Deferred income taxes” as a long-term liability on the Consolidated Balance Sheets. The deferred tax asset and liability net position is determined by tax jurisdiction.

The FASB allows companies to adopt an accounting policy to either recognize deferred taxes for global intangible low-taxed income (“GILTI”) or treat such as a tax cost in the year incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. Under this policy, we have not provided deferred taxes on temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.

We have not established deferred income taxes on accumulated undistributed earnings and other basis differences for operations outside the U.S., as such earnings and basis differences are indefinitely reinvested. Determining the unrecognized deferred tax liability for these earnings is not practicable. Generally, no U.S. federal income taxes will be imposed on future distributions of foreign earnings under the current law. However, distributions to the U.S. or other foreign jurisdictions could be subject to withholding and other local taxes, and these taxes would not be material.

Uncertain Tax Positions

The aggregate changes in the gross amount of unrecognized tax benefits, excluding interest and penalties consisted of the following (dollars in millions):


	For the Fiscal Years Ended May
	2020			2019	2018
Beginning balance	$	21.7	$	13.2	$	6.9
Decreases from positions established during prior fiscal years		—		(0.8)		—
Increases from positions established during current and prior fiscal years		10.3		10.4		7.9
Expiration of statute of limitations		(0.7)		(1.1)		(1.6)
Ending balance (a)	$	31.3	$	21.7	$	13.2

(a)

If we were to prevail on the unrecognized tax benefits recorded as of May 31, 2020 and May 26, 2019, it would result in a tax benefit of $26.7 million and $18.8 million, respectively, and a reduction in the effective tax rate. The ending balances exclude $5.5 million and $3.9 million of gross interest and penalties in fiscal 2020 and 2019, respectively. We accrue interest and penalties associated with uncertain tax positions as part of income tax expense.

Lamb Weston conducts business and files tax returns in numerous countries, states, and local jurisdictions. We do not have any significant open tax audits. As part of the tax matters agreement, Conagra has responsibility for tax audits associated with pre-Separation periods, including any associated adjustments for consolidated federal and state filings. Major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years.

Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S. federal and non-U.S. tax audits may be concluded within the next 12 months, which could increase or decrease the balance of our gross unrecognized tax benefits. The estimated impact on income tax expense and net income is not expected to be significant.