INCOME TAXES

6 Months Ended

Nov. 23, 2025

INCOME TAXES

INCOME TAXES

12. INCOME TAXES

In the second quarter of fiscal 2026 and 2025, we recognized income tax expense of $8.3 million and $61.5 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 (1.3)% and 17.8% for the second quarter of fiscal 2026 and 2025, respectively. In the first half of fiscal 2026 and 2025, we recognized income tax expense of $132.9 million and an income tax benefit of $77.4 million, respectively. The effective tax rate was (36.3)% and (11.5)% for the first half of fiscal 2026 and 2025, respectively.  

The effective tax rate in the second quarter of fiscal 2026 reflected the impact of an impairment of goodwill that is largely non-deductible for tax purposes. During the second quarter of fiscal 2026, goodwill impairment charges totaling $771.3 million with an associated tax benefit of $19.3 million were recognized.

The effective tax rate in the first half of fiscal 2026 reflected the above-cited items and was also negatively impacted by non-deductible goodwill related to the divestiture of the Chef Boyardee ^®, Mrs. Paul’s ^®, and Van de Kamp’s ^® businesses. This resulted in $62.8 million of tax expense being recognized on a pre-tax gain of $42.2 million.

The effective tax rate in the second quarter of fiscal 2025 reflected a $10.4 million benefit related to the release of valuation  allowances booked against certain deferred tax assets, and a $9.1 million benefit from the settlement of tax issues that were previously reserved.

The effective tax rate in the first half of fiscal 2025 reflected the above-cited items, as well as a $210.4 million deferred tax benefit related to the release of valuation allowances booked against certain deferred tax assets. Interactions with the U.S. Internal Revenue Service (IRS) regarding certain elections that had previously been under IRS review make the realization of certain deferred tax assets likely. The realization of these deferred tax assets allows for both current and future tax deductions through 2036.

On July 4, 2025, Public Law No. 119-21, referred to as the “One Big Beautiful Bill Act” (the “Act”), was enacted into law. The Act generally made permanent certain tax provisions of the Tax Cuts and Jobs Act (2017) and includes changes to U.S. tax law that will be applicable to Conagra beginning in fiscal 2026. These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. We currently expect a beneficial cash flow impact in fiscal 2026 from the enhanced expensing provisions. The Act does not materially impact our effective tax rate.