Income Taxes

The effective tax rate for the Company’s continuing operations for the three and six months ended February 29, 2016 was an expense of 3.3% and 1.6%, respectively, compared to a benefit of 4.8% and 4.7% for the three and six months ended February 28, 2015, respectively.

A reconciliation of the difference between the federal statutory rate and the Company’s effective rate is as follows:



	Three Months Ended				Six Months Ended
	2/29/2016		2/28/2015		2/29/2016		2/28/2015
Federal statutory rate	35.0	%	35.0	%	35.0	%	35.0	%
State taxes, net of credits	1.6		1.1		1.5		1.1
Foreign income taxed at different rates	(4.5	)	(7.4	)	(5.1	)	(7.6	)
Non-deductible officers’ compensation	(1.1	)	(0.1	)	(0.7	)	(0.1	)
Noncontrolling interests	2.6		0.5		1.8		0.5
Research and development credits	0.8		0.1		0.6		0.1
Valuation allowance on deferred tax assets	(35.2	)	(20.5	)	(32.9	)	(20.4	)
Non-deductible goodwill	(0.4	)	(2.8	)	(0.4	)	(2.8	)
Unrecognized tax benefits	(0.9	)	(0.5	)	(0.7	)	(0.5	)
Other	(1.2	)	(0.6	)	(0.7	)	(0.6	)
Effective tax rate	(3.3	)%	4.8	%	(1.6	)%	4.7	%

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(1)	For periods with reported pre-tax losses, the effect of reconciling items with positive signs is a tax benefit in excess of applying the federal statutory rate to the pre-tax loss.

The effective tax rate from continuing operations for the second quarter and first six months of fiscal 2016 was lower than the federal statutory rate of 35% primarily due to the low projected annual effective tax rate applied to the quarterly results. The low projected annual effective tax rate is the result of the Company’s full valuation allowance positions partially offset by increases in deferred tax liabilities from indefinite-lived assets in all jurisdictions.

The effective tax rate for the second quarter and first six months of fiscal 2015 was impacted primarily by the recognition of valuation allowances of $42 million on current period benefits in multiple taxing jurisdictions and the impact of the lower financial performance of foreign operations, which are taxed at more favorable rates. The deferred tax assets for which a valuation allowance was recorded were related primarily to deductible temporary differences created in the second quarter by the impairment charges to goodwill and other assets.

The Company files federal and state income tax returns in the U.S. and foreign tax returns in Puerto Rico and Canada. At this time, the Company is under examination in one of its taxing jurisdictions, Canada, for fiscal years 2013 and 2014. For U.S. federal income tax returns, fiscal years 2012 to 2015 remain subject to examination under the statute of limitations.