Income Taxes

6 Months Ended

Aug. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Overview

Our effective tax rate for the six months ended August 31, 2025, was 27.6% of tax expense compared with 30.0% of tax benefit for the six months ended August 31, 2024. Our effective tax rate for the three months ended August 31, 2025, was 37.9% of tax expense compared with 11.4% of tax benefit for the three months ended August 31, 2024.

For the six months and three months ended August 31, 2025, our effective tax rate was higher than the federal statutory rate of 21% largely due to changes in valuation allowances related to net operating losses and tax legislation updates, partially offset by (i) a net income tax benefit recognized as a result of the resolution of various tax examinations and assessments related to prior periods and (ii) the benefit of lower effective tax rates applicable to our foreign businesses.

For the six months ended August 31, 2024, our effective tax rate did not approximate the federal statutory rate of 21% largely due to (i) a net income tax benefit recognized as a result of the resolution of various tax examinations and assessments related to prior periods and (ii) the benefit of lower effective tax rates applicable for foreign businesses, partially offset by a net income tax impact resulting from the non-deductible portion of the Wine and Spirits goodwill impairment.

For the three months ended August 31, 2024, our effective tax rate did not approximate the federal statutory rate of 21% largely due to a net income tax impact resulting from the non-deductible portion of the Wine and Spirits goodwill impairment.

Tax Legislation

OB3 Act

On July 4, 2025, the OB3 Act was signed into U.S. law. The OB3 Act extends and modifies several provisions originally introduced under the Tax Cuts and Jobs Act of 2017, while also implementing additional changes to U.S. federal tax law. Key provisions of the OB3 Act include (i) the permanent extension of 100% bonus depreciation for qualifying assets, (ii) the elimination of the requirement to capitalize and amortize U.S.-based research and experimental expenditures, allowing for immediate expensing, (iii) changes to the limitation on the deductibility of interest expense, and (iv) modifications to the taxation of foreign earnings and other international income tax provisions. The OB3 Act contains multiple effective dates, with certain provisions taking effect beginning in calendar year 2025 and others phased in through calendar year 2027.

We have performed an initial evaluation of the impact of the OB3 Act on our consolidated financial statements, including the effects on our annual effective tax rate, deferred tax assets and liabilities, and cash flows. Based on this initial analysis and activities performed in response to the legislation, we believe there will be a negative impact on our effective tax rate for Fiscal 2026, primarily driven by the changes to the limitation on the deductibility of interest expense.

Additionally, for the six months and three months ended August 31, 2025, we recognized a valuation allowance against our deferred tax asset related to prior year interest expense limitations. We will continue to assess the implications of the OB3 Act, and our income tax provision may continue to be impacted as additional clarifications or interpretive guidance related to the OB3 Act is released.

Pillar Two

The OECD introduced a framework under Pillar Two which includes a 15% global minimum tax rate. Many jurisdictions in which we do business have started to enact laws implementing Pillar Two. We are monitoring these developments and currently do not believe these rules will have a material impact on our financial condition and/or consolidated results.