6. Income Taxes

On December 22, 2017, the Tax Reform Act was enacted which significantly revised the U.S. corporate income tax system. The Tax Reform Act, among other things, reduced the current corporate federal income tax rate to 21% from 35%, changed bonus depreciation regulations and limited deductions for executive compensation. The income tax rate reduction in the Tax Reform Act is effective January 1, 2018 which results in a blended federal statutory tax rate of 29.2% in fiscal 2018.

We re-measured our deferred tax assets and liabilities based on the tax rate at which they are expected to reverse in the future, which is either at a federal rate of 29.2% for reversals in fiscal 2018 or 21% for reversals in fiscal 2019 and subsequent years. During the third quarter of fiscal 2018, we recognized an income tax benefit of $13.0 million for the re-measurement impact on a provisional basis as permitted under Staff Accounting Bulletin No. 118, which allows the use of a measurement period, similar to that used in business combinations, to account for the impacts of the Tax Reform Act. In the fourth quarter of fiscal 2018, we completed our assessment and recognized an additional income tax benefit of $1.1 million resulting in a total income tax benefit of $14.1 million in fiscal 2018 for the re-measurement impact.

The provision for income tax on income from continuing operations includes the following components:

	For the Year Ended May 31,
	2018			2017		2016
Current:
Federal	$	14.6		$	9.3	$	13.7
State		0.1			0.2		0.4
Foreign		1.7			3.1		3.8

		16.4			12.6		17.9
Deferred		(12.9	)		12.5		5.5

	$	3.5		$	25.1	$	23.4

The provision for income taxes on pre-tax income differs from the amount computed by applying the U.S. federal statutory income tax rate of 29.2% for fiscal 2018 and 35.0% for fiscal 2017 and 2016 to income from continuing operations before provision for income taxes due to the following:

	For the Year Ended May 31,
	2018			2017			2016
Provision for income tax (benefit) at the federal statutory rate	$	22.5		$	27.0		$	24.1
Deferred tax re-measurement from the Tax Reform Act		(14.1	)		—			—
Excess tax benefits from stock-based compensation		(2.9	)		—			—
State net operating losses		1.3			5.7			1.1
Change in valuation allowance for state deferred tax assets		(3.4	)		(5.7	)		(1.1	)
Prior period adjustments		—			—			(1.3	)
Effective settlement of prior tax position		—			(2.2	)		—
Other		0.1			0.3			0.6

Provision for income tax	$	3.5		$	25.1		$	23.4

During the third quarter of fiscal 2016, we completed a reconciliation of our tax basis assets and liabilities and an analysis of our income tax payable which identified prior year immaterial errors netting to $0.2 million with $1.5 million recognized as income tax expense in discontinued operations and $1.3 million recognized as income tax benefit within income from continuing operations.

Income before provision for income taxes includes the following components:

	For the Year Ended May 31,
	2018		2017		2016
Domestic	$	58.7	$	57.7	$	55.7
Foreign		18.5		19.4		13.2

	$	77.2	$	77.1	$	68.9

Deferred tax liabilities and assets result primarily from the differences in the timing of the recognition of transactions for financial reporting and income tax purposes. Our deferred tax liabilities and assets consist of the following components:

	May 31,
	2018			2017
Deferred tax assets:
Inventory costs	$	15.9		$	21.3
Impairments		2.1			5.6
Postretirement benefits		2.2			6.8
Employee benefits		9.7			12.3
State net operating losses		8.6			9.4
Other		3.2			3.4

Total deferred tax assets		41.7			58.8
Valuation allowance		(7.0	)		(10.4	)

Total deferred tax assets net of valuation allowance		34.7			48.4

Deferred tax liabilities:
Tangible and intangible assets		(50.2	)		(85.5	)
Other		(0.2	)		(0.1	)

Total deferred tax liabilities		(50.4	)		(85.6	)

Net deferred tax liabilities	$	(15.7	)	$	(37.2	)

As of May 31, 2018, we have determined that the realization of our deferred tax assets is more likely than not and that a valuation allowance is not required except for certain state deferred tax assets, including net operating losses. The change in the valuation allowance was primarily the result of the expected utilization of a portion of these state net operating losses. Our net operating losses have carry forward periods that range from 5 to 20 years. Our history of operating earnings, our expectations for continued future earnings, the nature of certain of our deferred tax assets and the scheduled reversal of deferred tax liabilities, primarily related to depreciation, support the recoverability of the majority of the deferred tax assets.

Income tax receivable at May 31, 2018 was $1.0 million and was included in Other current assets on the Consolidated Balance Sheet. Income tax payable at May 31, 2017 was $12.3 million and was included in Accrued Liabilities on the Consolidated Balance Sheet.

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

	For the Year Ended May 31,
	2018		2017			2016
Balance, beginning of year	$	4.4	$	12.9		$	2.2
Additions for tax positions of prior years		—		0.4			10.7
Effective settlement of prior tax position		—		(8.9	)		—

Balance, end of year	$	4.4	$	4.4		$	12.9

In fiscal 2017, the reserve for unrecognized tax benefits decreased primarily as a result of effective settlement of tax positions for prior tax years which occurred upon the settlement of an IRS examination. Income tax expense in fiscal 2017 included a benefit of $2.2 million and discontinued operations included a benefit of $6.7 million for these effective settlements.

All of our unrecognized tax benefits as of May 31, 2018 and 2017 would be recorded as a component of income tax expense or income from discontinued operations, if recognized. We accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Fiscal years 2015 and subsequent are open for examination. Various states and foreign jurisdictions also remain open subject to their applicable statute of limitations.