Income Taxes

12 Months Ended

Apr. 30, 2020

Note 14: Income Taxes

Income before income taxes is as follows:


	Year Ended April 30,
	2020		2019		2018
Domestic	$	986.7	$	659.2	$	828.6
Foreign	40.0		42.4		32.4
Income before income taxes	$	1,026.7	$	701.6	$	861.0

The components of the provision for income taxes are as follows:


	Year Ended April 30,
	2020		2019		2018
Current:
Federal	$	188.7	$	227.9	$	277.9
Foreign	8.5		16.0		7.9
State and local	42.4		36.8		40.0
Deferred:
Federal	7.1		(73.6)		(802.3)
Foreign	0.6		(0.1)		0.5
State and local	(0.1)		(19.8)		(1.6)
Total income tax expense (benefit)	$	247.2	$	187.2	$	(477.6)

A reconciliation of the statutory federal income tax rate and the effective income tax rate is as follows:


	Year Ended April 30,
(Percent of Pre-tax Income)	2020			2019			2018
Statutory federal income tax rate	21.0		%	21.0		%	30.4		%
Tax reform – net impact on U.S. deferred tax assets and liabilities	—			—			(92.0)
Tax reform – transition tax	—			(0.5)			3.0
Goodwill impairment charges	—			2.9			5.5
Sale of the U.S. baking business	—			2.4			—
State and local income taxes	3.3			2.7			1.9
Domestic manufacturing deduction	—			—			(3.0)
Deferred tax benefit from integration	—			(2.4)			—
Other items – net	(0.2)			0.6			(1.3)
Effective income tax rate	24.1		%	26.7		%	(55.5)		%
Income taxes paid	$	227.1		$	250.9		$	336.8

The income tax expense of $187.2 for 2019 included the permanent tax impacts associated with the sale of the U.S. baking business and a goodwill impairment charge, partially offset by a noncash deferred tax benefit related to the integration of Ainsworth into the Company.

U.S. Tax Reform: On December 22, 2017, the U.S. government enacted the Tax Act, legislating comprehensive tax reform that reduced the U.S. federal statutory corporate tax rate from 35.0 percent to 21.0 percent effective January 1, 2018, broadened the U.S. federal income tax base, required companies to pay a one-time transition tax, and created new taxes on certain foreign-sourced earnings as part of a new territorial tax regime.

During 2019, we finalized our accounting for the income tax effects of enactment of the Tax Act, as required by

ASU 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which resulted in an immaterial adjustment to the net provisional benefit of $765.8 previously recorded during 2018. The net benefit included the revaluation of net deferred tax liabilities at the reduced federal income tax rate, offset in part by the estimated impact of the one-time transition tax.

Despite the completion of our accounting for the Tax Act, the amounts recorded may change as a result of future guidance and interpretation from the Internal Revenue Service (“IRS”) and various other taxing jurisdictions, all of which are continuing to analyze the complexities and interdependencies of the provisions within the Tax Act. Any future legislative and interpretive actions could result in additional income tax impacts which could be material in the period any such changes are enacted. During 2020, the Coronavirus Aid, Relief, and Economic Security Act was enacted, which included rollbacks of certain provisions of the Tax Act. While these specific rollbacks did not impact us, future legislative actions in response to COVID-19 could further modify provisions of the Tax Act, and such changes will need to be analyzed for their respective impacts on our income taxes at that time.

We are a voluntary participant in the Compliance Assurance Process (“CAP”) program offered by the IRS and are currently under a CAP examination for the tax years ended April 30, 2020 and 2019. Through the contemporaneous exchange of information with the IRS, this program is designed to identify and resolve tax positions with the IRS prior to the filing of a tax return, which allows us to remain current with our IRS examinations. The IRS has completed the CAP examinations for the tax years ended April 30, 2018 and 2017. The tax years prior to 2017 are no longer subject to U.S. federal tax examination. With limited exceptions, we are no longer subject to examination for state and local jurisdictions for the tax years prior to 2016 and for the tax years prior to 2013 for foreign jurisdictions.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant components of our deferred tax assets and liabilities are as follows:


	April 30,
	2020		2019
Deferred tax liabilities:
Intangible assets	$	1,399.7	$	1,428.3
Property, plant, and equipment	151.3		120.5
Leases	30.3		—
Other	15.1		13.4
Total deferred tax liabilities	$	1,596.4	$	1,562.2
Deferred tax assets:
Post-employment and other employee benefits	$	100.3	$	84.9
Tax credit and loss carryforwards	28.1		10.0
Intangible assets	16.9		17.2


Hedging transactions	59.5		15.6

Leases	31.9		—
Other	37.8		39.4
Total deferred tax assets	$	274.5	$	167.1
Valuation allowance	(29.7)		(3.5)
Total deferred tax assets, less allowance	$	244.8	$	163.6
Net deferred tax liability	$	1,351.6	$	1,398.6

We evaluate the realizability of deferred tax assets for each of the jurisdictions in which we operate. The total valuation allowance increased by a net amount of $26.2 during the year, primarily related to the foreign tax credit deferred tax assets that were determined to not be realizable.

During 2020, we returned $39.7 of international cash to the U.S., primarily driven by a reduction in our capital investment in certain foreign subsidiaries in conjunction with a restructuring of our international holding and operating entities. No foreign withholding taxes were applicable. The state income taxes were not significant and have been included in income tax expense. Deferred income taxes have not been provided on approximately $29.7 of remaining temporary differences related to our investments in foreign subsidiaries since these amounts remain permanently reinvested. It is not practical to estimate the amount of additional taxes that might be payable on these basis differences because of the numerous methods by which these differences could reverse.

Our unrecognized tax benefits were $13.1, $15.0, and $32.3, of which $10.5, $12.0, and $21.5 would affect the effective tax rate, if recognized, as of April 30, 2020, 2019, and 2018, respectively. Our accrual for tax-related net interest and penalties totaled $1.9, $3.3, and $4.0 as of April 30, 2020, 2019, and 2018, respectively. The amount of tax related to net interest and penalties credited to earnings totaled $0.1 and $0.8 for 2020 and 2019, respectively, and charged to earnings totaled $0.1 during 2018.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimated $2.6, primarily as a result of the expiration of statute of limitation periods.

A reconciliation of our unrecognized tax benefits is as follows:


	2020		2019		2018
Balance at May 1,	$	15.0	$	32.3	$	40.4
Increases:
Current year tax positions	1.4		0.9		1.1
Prior year tax positions	0.2		0.3		0.5
Decreases:
Settlement with tax authorities	—		9.0		3.0
Expiration of statute of limitations periods	3.5		9.5		6.7
Balance at April 30,	$	13.1	$	15.0	$	32.3