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INCOME TAXES
 12 Months Ended
May 29, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Total income tax expense (benefit) was allocated as follows:
Fiscal Year Ended
(in millions)May 29, 2022May 30, 2021May 31, 2020
Earnings (loss) from continuing operations$138.8 $(55.9)$(111.8)
Loss from discontinued operations(0.2)(3.2)(0.9)
Total consolidated income tax expense (benefit)$138.6 $(59.1)$(112.7)

The components of earnings (loss) from continuing operations before income taxes and the provision for income taxes thereon are as follows:
Fiscal Year Ended
(in millions)May 29, 2022May 30, 2021May 31, 2020
Earnings (loss) from continuing operations before income taxes:
U.S.$1,089.5 $575.1 $(165.1)
Foreign4.0 1.4 4.1 
Earnings (loss) from continuing operations before income taxes$1,093.5 $576.5 $(161.0)
Income taxes:
Current:
Federal$90.7 $(226.9)$5.8 
State and local72.7 5.3 15.9 
Foreign1.4 (0.2)1.0 
Total current$164.8 $(221.8)$22.7 
Deferred (principally U.S.):
Federal$10.3 $151.9 $(109.0)
State and local(36.3)14.0 (25.5)
Total deferred$(26.0)$165.9 $(134.5)
Total income tax expense (benefit)$138.8 $(55.9)$(111.8)

The effective income tax rates for fiscal 2022 and 2021 for continuing operations were 12.7 percent and (9.7) percent, respectively. During fiscal 2022, we had income tax expense of $138.8 million on earnings before income tax of $1.09 billion compared to an income tax benefit of $55.9 million on earnings before income taxes of $576.5 million in fiscal 2021. The change was driven primarily by an increase in earnings before income taxes in addition to the generation of a net operating loss for tax purposes in fiscal 2021 that was carried back to fiscal years 2016 and 2017. An income tax benefit was generated due to the difference in federal tax rates between fiscal 2021 at 21.0 percent and fiscal 2016 and 2017 at 35.0 percent.
The following table is a reconciliation of the U.S. statutory income tax rate to the effective income tax rate from continuing operations included in the accompanying consolidated statements of earnings:
Fiscal Year Ended
May 29, 2022May 30, 2021May 31, 2020
U.S. statutory rate21.0 %21.0 %21.0 %
State and local income taxes, net of federal tax benefits2.5 2.7 3.7 
Benefit of federal income tax credits(9.8)(11.1)47.3 
Stock-based compensation tax benefit(0.9)(1.9)5.0 
Nondeductible goodwill impairment— — (16.4)
Deferred revaluation (1)— — 6.3 
Federal net operating loss— (20.6)— 
Other, net(0.1)0.2 2.5 
Effective income tax rate (2)12.7 %(9.7)%69.4 %
(1)In fiscal 2020, we amended tax returns that were subject to a 35.0 percent or 29.4 percent statutory rate. Corresponding deferred tax balances were revalued at 21.0 percent.
(2)Our effective income tax rate of 12.7 percent for fiscal 2022 represents income tax expense as we generated pre-tax income from continuing operations in fiscal 2022. Our effective income tax rate of (9.7) percent for fiscal 2021 represents an income tax benefit as we generated pre-tax income from continuing operations in fiscal 2021. Our effective income tax rate of 69.4 percent for fiscal 2020 represents an income tax benefit as we generated a pre-tax loss from continuing operations in fiscal 2020.

As of May 29, 2022, we had estimated current prepaid federal income taxes of $274.8 million, which is included on our accompanying consolidated balance sheets as prepaid income taxes and estimated current state and federal income taxes payable of $28.5 million and $3.6 million, respectively, which is included on our accompanying consolidated balance sheets as accrued income taxes.
As of May 29, 2022, we had unrecognized tax benefits of $22.2 million, which represents the aggregate tax effect of the differences between tax return positions and benefits recognized in our consolidated financial statements, all of which would favorably affect the effective tax rate if resolved in our favor. Included in the balance of unrecognized tax benefits at May 29, 2022, is $5.8 million related to tax positions for which it is reasonably possible that the total amounts could change during the next 12 months based on the outcome of examinations. Of the $5.8 million, $3.7 million relates to items that would impact our effective income tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
(in millions)
Balances at May 30, 2021$51.8 
Additions related to current-year tax positions4.0 
Reductions related to prior-year tax positions(26.1)
Net reductions due to settlements with taxing authorities(4.5)
Reductions to tax positions due to statute expiration(3.0)
Balances at May 29, 2022$22.2 
Interest included in income tax expense in our consolidated statements of earnings is as follows:
Fiscal Year Ended
(in millions)May 29, 2022May 30, 2021May 31, 2020
Interest recorded on unrecognized tax benefits$1.3 $0.7 $1.8 
Interest recorded on income tax receivables$(3.1)$— $— 
Total (Benefit) Expense$(1.8)$0.7 $1.8 
At May 29, 2022, we had $2.2 million accrued for the payment of interest associated with unrecognized tax benefits.

For U.S. federal income tax purposes, we participate in the IRS’s Compliance Assurance Process (CAP), whereby our U.S. federal income tax returns are reviewed by the IRS both prior to and after their filing. Income tax returns are subject to audit by state and local governments, generally years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. The major jurisdictions in which the Company files income tax returns include the U.S. federal jurisdiction, Canada, and all states in the U.S. that have an income tax. With a few exceptions, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before fiscal 2021, and state and local, or non-U.S. income tax examinations by tax authorities for years before fiscal 2017.
The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:
(in millions)May 29, 2022May 30, 2021
Accrued liabilities$80.0 $65.4 
Compensation and employee benefits123.6 120.4 
Lease liabilities1,227.3 1,189.3 
Net operating loss, credit and charitable contribution carryforwards121.0 195.5 
Other6.3 21.8 
Gross deferred tax assets$1,558.2 $1,592.4 
Valuation allowance(20.8)(26.6)
Deferred tax assets, net of valuation allowance$1,537.4 $1,565.8 
Trademarks and other acquisition related intangibles(178.7)(171.5)
Buildings and equipment(402.1)(492.9)
Capitalized software and other assets(23.5)(22.3)
Lease assets(1,120.4)(1,089.9)
Other(13.8)(10.8)
Gross deferred tax liabilities$(1,738.5)$(1,787.4)
Net deferred tax liabilities$(201.1)$(221.6)

We have deferred tax assets of 63.8 million reflecting the benefit of state loss carryforwards, before federal benefit and valuation allowance, which expire at various dates between fiscal 2023 and fiscal 2041. We have deferred tax assets of $25.2 million of federal and $49.3 million state tax credits, before federal benefit and valuation allowance, which expire at various dates between fiscal 2023 and fiscal 2042.

We have taken current and potential future expirations into consideration when evaluating the need for valuation allowances against these deferred tax assets. A valuation allowance for deferred tax assets is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization is dependent upon the generation of future taxable income or the reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which our deferred tax assets are deductible, we believe it is more likely than not that we will realize the benefits of these deductible differences, net of the existing valuation allowances at May 29, 2022.