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Income Taxes | 12 Months Ended
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Apr. 30, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9: INCOME TAXES We file a consolidated federal income tax return in the U.S. with the IRS and file tax returns in various state, local, and foreign jurisdictions. Tax returns are typically examined and either settled upon completion of the examination or through the appeals process. Our U.S. federal income tax returns for 2017 and later years remain open for examination. Our U.S. federal income tax returns for 2016 and all prior periods are currently closed. With respect to state and local jurisdictions and countries outside of the U.S., we are typically subject to examination for three to six years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest, and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to federal, state, local or foreign audits. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law. The CARES Act includes, among other items, modifications to net operating loss carryback periods, net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act allows a five-year carryback of net operating losses generated between 2018 and 2021 to fully offset certain taxable income previously subject to a 35% statutory tax rate. As a result of the CARES Act and changes to our methods of accounting for items under the Internal Revenue Code, we generated a loss for tax purposes on our calendar 2020 tax return, will carry back the loss to two of the five preceding tax years, and obtain a refund of previously paid federal income taxes. The net operating loss carryback has reduced our effective tax rate and income taxes payable and increased our unrecognized tax benefits, income tax refund receivables, and deferred tax liabilities. The net operating loss carryback will reopen our 2015 tax return to examination. The components of income (loss) from continuing operations upon which domestic and foreign income taxes have been provided are as follows:
(in 000s)
Year ended April 30, |  | 2021 |  | 2020 |  | 2019
Domestic |  | $ | 489,499 |  |  | $ | 56,121 |  |  | $ | 389,319 |
Foreign |  | 179,237 |  |  | (59,495) |  |  | 155,841 |
|  | $ | 668,736 |  |  | $ | (3,374) |  |  | $ | 545,160 |
We operate in multiple income tax jurisdictions both within the United States and internationally. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on transfer pricing analyses of comparable companies and predictions of future economic conditions. Although these intercompany transactions reflect arm’s length terms and the proper transfer pricing documentation is in place, transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates. The reconciliation between the income tax provision and the amount computed by applying the statutory U.S. federal tax rate to income taxes of continuing operations is as follows:
Year ended April 30, |  | 2021 |  | 2020 |  | 2019
U.S. statutory tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Change in tax rate resulting from: |  |  |  |  |  |
State income taxes, net of federal income tax benefit |  | 1.8 | % |  | 20.4 | % |  | 2.3 | %
Earnings taxed in foreign jurisdictions |  | (1.2) | % |  | 619.4 | % |  | (2.7) | %
Permanent differences |  | 0.5 | % |  | (257.5) | % |  | 0.3 | %
Impairment of goodwill |  | — | % |  | (832.5) | % |  | — | %
Uncertain tax positions |  | 7.5 | % |  | 508.3 | % |  | (2.3) | %
U.S. tax on income from foreign affiliates |  | 1.0 | % |  | (247.4) | % |  | — | %
Remeasurement of deferred tax assets and liabilities |  | (0.1) | % |  | 117.6 | % |  | 0.2 | %
Changes in prior year estimates |  | (0.5) | % |  | 55.5 | % |  | — | %
Federal income tax credits |  | (0.9) | % |  | 216.3 | % |  | — | %
Tax impacts of stock-based compensation vesting |  | — | % |  | 44.8 | % |  | — | %
Tax benefit due to NOL carryback under CARES Act |  | (17.5) | % |  | — | % |  | — | %
Tax deductible write-down of foreign investment |  | (1.7) | % |  | — | % |  | — | %
Change in valuation allowance - domestic |  | (0.2) | % |  | 37.1 | % |  | 0.4 | %
Change in valuation allowance - foreign |  | 1.7 | % |  | 20.6 | % |  | (0.8) | %
Other |  | 0.3 | % |  | (41.2) | % |  | (0.1) | %
Effective tax rate |  | 11.7 | % |  | 282.4 | % |  | 18.3 | %
Our effective tax rate for continuing operations was 11.7% and 282.4% for fiscal year 2021 and 2020, respectively. The decrease in the effective tax rate in 2021 compared to 2020 is primarily due to the near break-even loss in 2020 of $3.4 million, which caused an exaggerated impact for nearly all adjustments impacting the rate. Our 2021 effective tax rate is also lower because of net operating loss carrybacks generated during the year, partially offset by uncertain tax positions recorded in the current year. The increase in the effective tax rate in fiscal year 2020 compared to fiscal year 2019 is also primarily due to the near break-even loss in 2020 of $3.4 million, which caused an exaggerated impact for nearly all adjustments impacting the rate. For 2020, the largest increases in the effective tax rate over 2019 are tax benefits from statute of limitations expiring on certain uncertain tax positions and the mix of earnings in foreign jurisdictions, offset by the adverse tax impacts associated with the nondeductible goodwill impairment to the Wave reporting unit. Due to the pretax loss in 2020, the tax benefits increased the effective tax rate while tax expense decreased the effective tax rate. The components of income tax expense (benefit) for continuing operations are as follows:
(in 000s) |  |
Year ended April 30, |  | 2021 |  | 2020 |  | 2019 |  |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | 58,834 |  |  | $ | 18,048 |  |  | $ | 74,993 |  |  |
State |  | 12,000 |  |  | (16,614) |  |  | 12,345 |  |  |
Foreign |  | 26,032 |  |  | 1,991 |  |  | 6,711 |  |  |
|  | 96,866 |  |  | 3,425 |  |  | 94,049 |  |  |
Deferred: |  |  |  |  |  |  |  |
Federal |  | 2,493 |  |  | 1,703 |  |  | 6,625 |  |  |
State |  | (11,368) |  |  | (1,516) |  |  | (1,070) |  |  |
Foreign |  | (9,467) |  |  | (13,142) |  |  | 300 |  |  |
|  | (18,342) |  |  | (12,955) |  |  | 5,855 |  |  |
Total income taxes (benefit) for continuing operations |  | $ | 78,524 |  |  | $ | (9,530) |  |  | $ | 99,904 |  |  |
The net loss from discontinued operations for fiscal years 2021, 2020 and 2019 totaled $6.4 million, $13.7 million and $22.7 million, respectively, and was net of tax benefits of $3.9 million, $4.1 million and $6.8 million, respectively. The significant components of deferred tax assets and liabilities are reflected in the following table:
(in 000s)
As of April 30, |  | 2021 |  | 2020
Deferred tax assets: |  |  |  |
Accrued expenses |  | $ | 3,576 |  |  | $ | 4,646 |
Deferred revenue |  | 10,445 |  |  | 11,082 |
Allowance for credit losses and related reserves |  | 33,027 |  |  | 29,666 |
Deferred and stock-based compensation |  | 24,712 |  |  | 6,669 |
Net operating loss carry-forward |  | 104,013 |  |  | 86,213 |
Lease liabilities |  | 112,249 |  |  | 126,505 |
Federal tax benefits related to state unrecognized tax benefits |  | 16,682 |  |  | 16,729 |
Property and equipment |  | 40,138 |  |  | — |
Intangibles - intellectual property |  | 86,711 |  |  | 85,688 |
Valuation allowance |  | (55,401) |  |  | (45,124) |
Total deferred tax assets |  | 376,152 |  |  | 322,074 |
Deferred tax liabilities: |  |  |  |
Prepaid expenses and other |  | (11,927) |  |  | (5,189) |
Lease right of use assets |  | (109,726) |  |  | (123,900) |
Property and equipment |  | — |  |  | (12,221) |
Income tax method change |  | (56,257) |  |  | — |
Intangibles |  | (72,650) |  |  | (64,252) |
Total deferred tax liabilities |  | (250,560) |  |  | (205,562) |
Net deferred tax assets |  | $ | 125,592 |  |  | $ | 116,512 |
A reconciliation of the deferred tax assets and liabilities and the corresponding amounts reported in the consolidated balance sheets is as follows:
(in 000s)
As of April 30, |  | 2021 |  | 2020
Deferred income tax assets |  | $ | 141,836 |  |  | $ | 138,527 |
Deferred tax liabilities |  | (16,244) |  |  | (22,015) |
Net deferred tax asset |  | $ | 125,592 |  |  | $ | 116,512 |
Changes in our valuation allowance for fiscal years 2021, 2020 and 2019 are as follows:
(in 000s)
Year ended April 30, |  | 2021 |  | 2020 |  | 2019
Balance, beginning of the year |  | $ | 45,124 |  |  | $ | 47,070 |  |  | $ | 49,215 |
Additions charged to costs and expenses |  | 13,492 |  |  | 2,151 |  |  | 2,302 |
Deductions |  | (3,215) |  |  | (4,097) |  |  | (4,447) |
Balance, end of the year |  | $ | 55,401 |  |  | $ | 45,124 |  |  | $ | 47,070 |
Our valuation allowance on deferred tax assets has a net increase of $10.3 million during the current period. The gross increase in valuation allowance of $13.5 million is related to net operating loss deferred tax assets generated by foreign losses that we do not expect to utilize in future years. This $13.5 million increase is offset by a $3.2 million decrease to our valuation allowance balance for adjustments to certain state and foreign net operating losses we now expect to utilize in future periods. Certain of our subsidiaries file stand-alone returns in various state, local and foreign jurisdictions, and others join in filing consolidated or combined returns in such jurisdictions. As of April 30, 2021, we had net operating losses in various states and foreign jurisdictions. The amount of state and foreign net operating losses varies by taxing jurisdiction. We maintain a valuation allowance of $21.3 million on state net operating losses and $33.2 million on foreign net operating losses for the portion of such loses that, more likely than not, will not be realized. Of the $49.5 million of net operating loss deferred tax assets, $10.4 million will expire in varying amounts during fiscal years 2022 through 2041 and the remaining $39.1 million has no expiration. We do not currently intend to repatriate non-borrowed funds held by our foreign subsidiaries in a manner that would trigger a material tax liability; therefore, no provision has been made for income taxes that might be payable upon remittance of such earnings. The amount of unrecognized tax liability on these foreign earnings, net of expected foreign tax credits, is immaterial as of April 30, 2021. Changes in unrecognized tax benefits for fiscal years 2021, 2020 and 2019 are as follows:
(in 000s)
Year ended April 30, |  | 2021 |  | 2020 |  | 2019
Balance, beginning of the year |  | $ | 168,062 |  |  | $ | 185,144 |  |  | $ | 186,061 |
Additions based on tax positions related to prior years |  | 121,364 |  |  | 1,501 |  |  | 9,937 |
Reductions based on tax positions related to prior years |  | (34,470) |  |  | (10,128) |  |  | (42,647) |
Additions based on tax positions related to the current year |  | 43,800 |  |  | 12,093 |  |  | 38,611 |
Reductions related to settlements with tax authorities |  | (29,362) |  |  | (980) |  |  | (2,025) |
Expiration of statute of limitations |  | (4,584) |  |  | (19,568) |  |  | (4,793) |
Balance, end of the year |  | $ | 264,810 |  |  | $ | 168,062 |  |  | $ | 185,144 |
The total gross unrecognized tax benefit ending balance as of April 30, 2021, 2020 and 2019, includes $214.9 million, $132.3 million and $122.5 million, respectively, which if recognized, would impact our effective tax rate. The difference results from adjusting the gross balances for such items as federal, state and foreign deferred items, interest and deductible taxes. The current year additions in unrecognized tax benefits related to prior years are primarily related to net operating loss carryback allowed by the CARES Act. Reductions from prior year are primarily related to settlements with taxing authorities and expirations of statute of limitations. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $69.8 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations, anticipated closure of various tax matters currently under examination, and settlements with tax authorities. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included. Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. The total gross interest and penalties accrued as of April 30, 2021, 2020 and 2019 totaled $24.9 million, $22.0 million and $22.4 million, respectively.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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