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Income Taxes
 12 Months Ended
Aug. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Provision for Income Taxes
Income (loss) before income tax expense is summarized below (in thousands):
 
Fiscal Year Ended August 31,
 
2020
 
2019
 
2018
Domestic(1)
$
(452,233
)
 
$
(415,707
)
 
$
(426,897
)
Foreign(1)
712,971

 
866,411

 
800,298

 
$
260,738

 
$
450,704

 
$
373,401

 
(1) 
Includes the elimination of intercompany foreign dividends paid to the U.S.
Income tax expense (benefit) is summarized below (in thousands):
 
Fiscal Year Ended August 31,
 
2020
 
2019
 
2018
Current:
 
 
 
 
 
Domestic - federal
$
(3,054
)
 
$
(23,675
)
 
$
69,080

Domestic - state
1,367

 
1,383

 
134

Foreign
179,462

 
175,993

 
178,790

Total current
177,775

 
153,701

 
248,004

Deferred:
 
 
 
 
 
Domestic - federal
(9,692
)
 
(8,000
)
 
(24,342
)
Domestic - state
107

 
(2,202
)
 
93

Foreign
35,769

 
17,731

 
62,105

Total deferred
26,184

 
7,529

 
37,856

Total income tax expense
$
203,959

 
$
161,230

 
$
285,860


 
Reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is summarized below:
 
Fiscal Year Ended August 31,
 
2020
 
2019
 
2018
U.S. federal statutory income tax rate
21.0
 %
 
21.0
 %
 
25.7
 %
State income taxes, net of federal tax benefit
(2.6
)
 
(1.7
)
 
(1.5
)
Impact of foreign tax rates(1)(2)
(0.9
)
 
(9.9
)
 
(19.3
)
Permanent impact of non-deductible cost
3.2

 
1.8

 
5.9

Income tax credits(1)
(2.5
)
 
(3.1
)
 
(2.8
)
Changes in tax rates on deferred tax assets and liabilities(3)
10.3

 
0.2

 
4.0

One-time transition tax related to the Tax Act(4)
—

 
(0.5
)
 
62.2

Indefinite reinvestment assertion impact(5)
—

 
0.9

 
5.8

Valuation allowance(6)
16.8

 
1.3

 
(16.4
)
Non-deductible equity compensation
2.2

 
1.4

 
5.5

Impact of intercompany charges and dividends
15.0

 
10.4

 
7.3

Reclassification of stranded tax effects in AOCI
—

 
—

 
(4.0
)
Global Intangible Low-Taxed Income(7)
13.7

 
10.4

 
—

Other, net
2.0

 
3.6

 
4.2

Effective income tax rate
78.2
 %
 
35.8
 %
 
76.6
 %
 
(1) 
The Company has been granted tax incentives for various subsidiaries in Brazil, China, Malaysia, Singapore and Vietnam, which expire at various dates through fiscal year 2031 and are subject to certain conditions with which the Company expects to comply. These tax incentives resulted in a tax benefit of approximately $42.6 million ($0.28 per basic share), $67.3 million ($0.43 per basic share) and $52.1 million ($0.30 per basic share) during the fiscal years ended August 31, 2020, 2019 and 2018, respectively.
(2) 
For the fiscal year ended August 31, 2020, the decrease in the impact of foreign tax rates was primarily related to decreased income in low tax rate jurisdictions. For the fiscal year ended August 31, 2019, the decrease in the impact of foreign tax rates was primarily due to a decrease in the U.S. federal statutory income tax rate due to the Tax Act.
(3) 
For the fiscal year ended August 31, 2020, the increase in the changes in tax rates on deferred tax assets and liabilities was primarily due to the re-measurement of deferred tax assets related to an extension of a non-U.S. tax incentive of $21.2 million. For the fiscal year ended August 31, 2018, the changes in tax rates on deferred tax assets and liabilities included changes related to the Tax Act, excluding the impact of the enacted rate change on the U.S. valuation allowance.
(4) 
The one-time transition tax impact for the fiscal year ended August 31, 2018 was due to the comprehensive tax legislation enacted on December 22, 2017, commonly referred to as the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The enacted changes included a mandatory income inclusion of the historically untaxed foreign earnings of a U.S. company’s foreign subsidiaries and effectively taxed such income at reduced tax rates (“transition tax”). The calculation of the one-time transition tax is based upon post-1986 earnings and profits, applicable foreign tax credits
and relevant limitations, utilization of U.S. federal net operating losses and tax credits and the amount of foreign earnings held in cash and non-cash assets.
(5) 
As a result of the Tax Act, the Company made a change to the indefinite reinvestment assertion for the fiscal year ended August 31, 2018 resulting in foreign withholding taxes that would be incurred upon such future remittances of cash.
(6) 
The valuation allowance change for the fiscal year ended August 31, 2020 was primarily due to the increase in deferred tax assets for sites with existing valuation allowances. The valuation allowance change for the fiscal years ended August 31, 2019 and 2018 was primarily due to utilization of domestic federal net operating losses and tax credits against the one-time transition tax and the change in enacted tax rate applied to U.S. deferred tax assets and liabilities for the fiscal year ended August 31, 2018. The increase for the fiscal year ended August 31, 2019 was partially offset by an income tax benefit of $17.5 million for the reversal of a U.S. valuation allowance due to an intangible asset reclassification from indefinite-life to finite-life.
(7) 
GILTI, a newly defined category of foreign subsidiary income which is taxable to U.S. shareholders each year, applied beginning in the fiscal year ended August 31, 2019 and primarily results in the utilization of current year U.S. federal operating losses. The Company records the effects of GILTI as a period cost.
Deferred Tax Assets and Liabilities
Significant components of the deferred tax assets and liabilities are summarized below (in thousands):
 
Fiscal Year Ended August 31,
 
2020
 
2019
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
197,516

 
$
183,297

Receivables
7,749

 
6,165

Inventories
10,917

 
9,590

Compensated absences
12,292

 
10,401

Accrued expenses
85,363

 
81,731

Property, plant and equipment, principally due to differences in depreciation and amortization
42,484

 
66,268

Domestic tax credits
29,426

 
42,464

Foreign jurisdiction tax credits
15,282

 
15,345

Equity compensation
11,369

 
9,796

Domestic interest carryforwards
4,846

 
5,853

Cash flow hedges
9,064

 
9,878

Capital loss carryforwards
20,087

 
7,799

Revenue recognition
43,376

 
19,195

Operating lease liabilities
89,424

 
—

Other
18,120

 
21,907

Total deferred tax assets before valuation allowances
597,315

 
489,689

Less valuation allowances
(341,200
)
 
(287,604
)
Net deferred tax assets
$
256,115

 
$
202,085

Deferred tax liabilities:
 
 
 
Unremitted earnings of foreign subsidiaries
76,711

 
75,387

Intangible assets
32,262

 
39,242

Operating lease assets
83,311

 
—

Other
13,081

 
4,447

Total deferred tax liabilities
$
205,365

 
$
119,076

Net deferred tax assets
$
50,750

 
$
83,009


Based on the Company’s historical operating income, projection of future taxable income, scheduled reversal of taxable temporary differences, and tax planning strategies, management believes that it is more likely than not that the Company will realize the benefit of its deferred tax assets, net of valuation allowances recorded.
As of August 31, 2020, the Company intends to indefinitely reinvest the remaining earnings from its foreign subsidiaries for which a deferred tax liability has not already been recorded. The accumulated earnings are the most significant component
of the basis difference which is indefinitely reinvested. As of August 31, 2020, the indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been provided were approximately $2.4 billion. The estimated amount of the unrecognized deferred tax liability on these reinvested earnings was approximately $0.2 billion.
Tax Carryforwards
The amount and expiration dates of income tax net operating loss carryforwards, tax credit carryforwards, and tax capital loss carryforwards, which are available to reduce future taxes, if any, as of August 31, 2020 are as follows:
(dollars in thousands)
Last Fiscal Year of Expiration
 
Amount
Income tax net operating loss carryforwards:(1)
 
 
 
Domestic - state
2040 or indefinite
 
$
57,131

Foreign
2030 or indefinite
 
$
667,388

Tax credit carryforwards:(1)
 
 
 
Domestic - federal
2030
 
$
26,315

Domestic - state
2027 or indefinite
 
$
3,858

Foreign(2)
2027 or indefinite
 
$
15,282

Tax capital loss carryforwards:(3)
 
 
 
Domestic - federal
2025
 
$
78,700

 
(1) 
Net of unrecognized tax benefits.
(2) 
Calculated based on the deferral method and includes foreign investment tax credits.
(3) 
The tax capital loss carryforwards were primarily from an impairment of an investment that was deemed worthless for tax purposes.
Unrecognized Tax Benefits
Reconciliation of the unrecognized tax benefits is summarized below (in thousands):
 
Fiscal Year Ended August 31,
 
2020
 
2019
 
2018
Beginning balance
$
164,383

 
$
256,705

 
$
201,355

Additions for tax positions of prior years
9,841

 
20,158

 
14,465

Reductions for tax positions of prior years(1)
(9,346
)
 
(106,252
)
 
(21,045
)
Additions for tax positions related to current year(2)
26,360

 
35,769

 
81,866

Cash settlements
(510
)
 
—

 
(1,659
)
Reductions from lapses in statutes of limitations
(1,054
)
 
(2,570
)
 
(7,496
)
Reductions from non-cash settlements with taxing authorities(3)
(2,226
)
 
(35,582
)
 
(5,928
)
Foreign exchange rate adjustment
2,345

 
(3,845
)
 
(4,853
)
Ending balance
$
189,793

 
$
164,383

 
$
256,705

Unrecognized tax benefits that would affect the effective tax rate (if recognized)
$
108,551

 
$
93,237

 
$
117,455

 
(1) 
The reductions for tax positions of prior years for the fiscal year ended August 31, 2019 are primarily related to a non-U.S. taxing authority ruling related to certain non-U.S. net operating loss carryforwards, offset with a valuation allowance and the impacts of the Tax Act.
(2) 
The additions for the fiscal years ended August 31, 2020 are primarily related to taxation of certain intercompany transactions. The additions for the fiscal years ended August 31, 2019 and 2018 are primarily related to the impacts of the Tax Act and taxation of certain intercompany transactions.
(3) 
The reductions from settlements with taxing authorities for the fiscal year ended August 31, 2019 are primarily related to the settlement of a U.S. audit.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company’s accrued interest and penalties were approximately $22.8 million and $18.9 million as of August 31, 2020 and 2019,
respectively. The Company recognized interest and penalties of approximately $3.9 million, $(1.5) million and $(6.7) million during the fiscal years ended August 31, 2020, 2019 and 2018, respectively.
It is reasonably possible that the August 31, 2020 unrecognized tax benefits could decrease during the next 12 months by $4.9 million, primarily related to a taxing authority agreement associated with intercompany transactions.
The Company is no longer subject to U.S. federal tax examinations for fiscal years before August 31, 2015. In major non-U.S. and state jurisdictions, the Company is no longer subject to income tax examinations for fiscal years before August 31, 2010 and August 31, 2009, respectively.