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Income Taxes
 12 Months Ended
Jan. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

The components of income (loss) before income taxes are as follows:

 

 

Fiscal Year Ended January 31,

 

 

2023

 

 

2022

 

 

2021

 

Domestic

 

$

217,894

 

 

$

389,059

 

 

$

13,103

 

Foreign

 

 

3,385

 

 

 

15,572

 

 

 

(9,590

)

 

$

221,279

 

 

$

404,631

 

 

$

3,513

 

 

The components of the provision for income tax expense/(benefit) are as follows:

 

 

Fiscal Year Ended January 31,

 

 

2023

 

 

2022

 

 

2021

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

49,695

 

 

$

75,533

 

 

$

11,623

 

State

 

 

12,950

 

 

 

18,972

 

 

 

894

 

Foreign

 

 

1,512

 

 

 

2,205

 

 

 

4,030

 

 

$

64,157

 

 

$

96,710

 

 

$

16,547

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

$

(4,724

)

 

$

(4,151

)

 

$

(7,801

)

State

 

 

671

 

 

 

498

 

 

 

(3,325

)

Foreign

 

 

1,476

 

 

 

958

 

 

 

(3,144

)

 

 

(2,577

)

 

 

(2,695

)

 

 

(14,270

)

 

$

61,580

 

 

$

94,015

 

 

$

2,277

 

 

The following table reflects the differences between the statutory U.S. federal income tax rate and the Company’s effective tax rate:

 

 

Fiscal Year Ended January 31,

 

 

2023

 

 

2022

 

 

2021

 

Expected provision at statutory U.S. federal tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State and local income taxes, net of federal tax benefit

 

 

4.9

 

 

 

3.8

 

 

 

(88.1

)

Foreign taxes

 

 

0.3

 

 

 

(1.8

)

 

 

56.9

 

Uncertain tax positions

 

 

0.3

 

 

 

0.1

 

 

 

28.8

 

Stock compensation

 

 

0.4

 

 

 

(0.1

)

 

 

36.1

 

Tax rate changes

 

 

0.4

 

 

 

0.1

 

 

 

8.5

 

Prior year adjustments

 

 

—

 

 

 

0.1

 

 

 

15.7

 

Federal tax credits

 

 

(0.2

)

 

 

(0.2

)

 

 

(16.0

)

Nondeductible expenses

 

 

1.6

 

 

 

0.1

 

 

 

8.6

 

Tax exempt income

 

 

(0.1

)

 

 

—

 

 

 

(3.4

)

Other

 

 

(0.8

)

 

 

0.1

 

 

 

(3.3

)

Effective tax rate

 

 

27.8

%

 

 

23.2

%

 

 

64.8

%

 

The variance in percentages for the components of the effective tax rate for fiscal 2021 as compared to fiscal 2023 and 2022 are primarily due to the ratio of foreign taxable losses to global taxable profits and lower income before income taxes in fiscal 2021.

The significant components of deferred tax assets and liabilities as of January 31, 2023 and 2022 are as follows:

 

 

January 31,

 

 

2023

 

 

2022

 

Deferred tax liabilities:

 

 

 

 

 

 

Prepaid expense

 

$

(2,727

)

 

$

(3,132

)

Depreciation

 

 

(46,552

)

 

 

(50,674

)

Operating lease right-of-use assets

 

 

(224,099

)

 

 

(233,299

)

Other temporary differences

 

 

(353

)

 

 

(365

)

Gross deferred tax liabilities

 

 

(273,731

)

 

 

(287,470

)

Deferred tax assets:

 

 

 

 

 

 

Operating lease liabilities

 

 

260,596

 

 

 

272,953

 

Deferred rent

 

 

15,296

 

 

 

14,176

 

Inventory

 

 

22,967

 

 

 

19,896

 

Accounts receivable

 

 

1,114

 

 

 

1,252

 

Net operating loss carryforwards

 

 

18,369

 

 

 

20,873

 

Tax uncertainties

 

 

1,430

 

 

 

1,135

 

Accrued salaries and benefits

 

 

24,084

 

 

 

25,249

 

Income tax credits

 

 

4,540

 

 

 

4,714

 

Other temporary differences

 

 

29,362

 

 

 

28,000

 

Gross deferred tax assets, before valuation allowances

 

 

377,758

 

 

 

388,248

 

Valuation allowances

 

 

(33,087

)

 

 

(30,852

)

Net deferred tax assets

 

$

70,940

 

 

$

69,926

 

 

Net deferred tax assets are attributed to the jurisdictions in which the Company operates. As of January 31, 2023 and 2022, respectively, $42,277 and $38,718 were attributable to U.S. federal, $18,458 and $19,190 were attributed to state jurisdictions and $10,205 and $12,018 were attributed to foreign jurisdictions.

As of January 31, 2023, certain non-U.S. subsidiaries of the Company had net operating loss carryforwards for tax purposes of approximately $10,367 that expire from 2025 through 2031 and approximately $54,875 that do not expire. Certain U.S. subsidiaries of the Company had state net operating loss carryforwards for tax purposes of approximately $28,536 that expire from 2024 through 2043 and approximately $11,315 that do not expire. Certain U.S. subsidiaries of the Company had state credit carryforwards for tax purposes of approximately $5,799 that expire from 2027 through 2030. As of January 31, 2023, the Company had full and partial valuation allowances for certain foreign and state net operating loss carryforwards and a partial valuation allowance against state credit carryforwards where it was uncertain the carryforwards would be utilized. The Company had no valuation allowance for certain other foreign and state net operating loss carryforwards where management believes it is more-likely-than-not the tax benefit of these carryforwards will be realized.

As of January 31, 2023, approximately $118,248 of cash and cash equivalents were held by the Company’s non-U.S. subsidiaries for which no deferred taxes have been provided. The Company has accumulated undistributed earnings generated by foreign subsidiaries of approximately $434,565. Since such earnings have previously been subject to the one-time deemed repatriation transition tax required by the U.S. Tax Cuts and Jobs Act or other U.S. tax requirements on undistributed foreign earnings, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes. The Company continues to believe that foreign earnings are indefinitely reinvested excluding earnings that have previously been subject to the one-time deemed repatriation transition tax required by the U.S. Tax Cuts and Jobs Act. With respect to outside basis differences in all other non-U.S. subsidiaries, the Company expects that either (i) such basis differences will not reverse in the foreseeable future, or (ii) such basis differences will reverse in a tax-neutral manner.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

 

 

January 31,

 

Tax Benefit Reconciliation

 

2023

 

 

2022

 

 

2021

 

Balance at the beginning of the period

 

$

18,945

 

 

$

22,259

 

 

$

21,924

 

Increases in tax positions for prior years

 

 

1,055

 

 

 

28

 

 

 

476

 

Decreases in tax positions for prior years

 

 

(974

)

 

 

(3,178

)

 

 

(51

)

Increases in tax positions for current year

 

 

147

 

 

 

249

 

 

 

41

 

Settlements

 

 

(177

)

 

 

—

 

 

 

—

 

Lapse in statute of limitations

 

 

(262

)

 

 

(413

)

 

 

(131

)

Balance at the end of the period

 

$

18,734

 

 

$

18,945

 

 

$

22,259

 

 

The total amount of net unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $21,890 and $21,288 as of January 31, 2023 and 2022, respectively. The Company accrues interest and penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income, which is consistent with the recognition of these items in prior reporting periods. During the years ended January 31, 2023, 2022 and 2021, the Company recognized expense of $1,145, $630 and $950, respectively, related to interest and penalties. The Company accrued $4,586 and $3,440 for the payment of interest and penalties as of January 31, 2023 and 2022, respectively.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is under audit in certain state and foreign jurisdictions. Certain federal, foreign and state jurisdictions are subject to audit from fiscal 2010 to 2022. It is possible that a state or foreign examination may be resolved within 12 months. Due to the potential for resolution of federal and foreign audit and state examinations, and the expiration of various statutes of limitation, it is possible that the Company’s gross unrecognized tax benefits balance may change within the next 12 months by a range of zero to $414.

On February 10, 2023, the Company committed $100,000 to purchase a membership interest in a federal low-income housing tax credit entity. An initial payment of $20,000 was paid at closing with the remaining balance payable in quarterly installments over a five year period beginning in fiscal 2024. In exchange for the payments, the Company expects to realize a comparable amount of tax credits that will reduce its future federal income tax payments.