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Income Taxes
 9 Months Ended 12 Months Ended
Oct. 31, 2021
Jan. 31, 2021
Planet Labs Inc [Member]    
Income Taxes
12.
Income Taxes
The Company recorded income tax expense of $0.8 million and $0.6 million for the nine months ended October 31, 2021 and 2020, respectively. For the nine months ended October 31, 2021 and 2020, the income tax expense was primarily driven by the current tax on foreign earnings. The effective tax rates for the nine months ended October 31, 2021 and 2020 differed from the federal statutory tax rate primarily due to the valuation allowance on the majority of its U.S. and foreign deferred tax assets and foreign rate differences.
The Company evaluates its tax positions on a quarterly basis and revises its estimates accordingly. Gross unrecognized tax benefits were $5.4 million and $4.7 million as of October 31, 2021 and January 31, 2021, respectively. The gross unrecognized tax benefits, if recognized, would not affect the effective tax rate due to the valuation allowance against the deferred tax assets. The Company determined that no accrual for interest and penalties was required as of October 31, 2021 and January 31, 2021 and no such expenses were incurred in the periods presented.
The Company does not anticipate the total amounts of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
The Company files U.S. federal, various state and foreign income tax returns. The Company is not currently under audit by any taxing authorities. All tax years remain open to examination by taxing jurisdictions to which the Company is subject.
 
13.
Income Taxes
The components of the loss before income taxes are as follows:
 
    
Year Ended January 31,
  
(in thousands)
   
2021
     
2020
  
Domestic
    $ (127,599 )     $ (123,760 ) 
Foreign
      1,569      176
  
 
 
     
 
 
  
Total loss before income taxes
    $ (126,030 )     $ (123,584 ) 
  
 
 
     
 
 
  
 
 
The provision for (benefit from) income taxes consists of the following (in thousands):
 
    
Year Ended
January 31,
  
(in thousands)
   
2021
     
2020
  
Current
      
Federal
    $ —        $ —    
State
      23      29
Foreign
      1,095      500
  
 
 
     
 
 
  
Total current tax provision
      1,118      529
  
 
 
     
 
 
  
Deferred
      
Federal
      60      —    
State
      30      —    
  
 
 
     
 
 
  
Foreign
      (135 )       (399 ) 
  
 
 
     
 
 
  
Total deferred tax benefit
      (45 )       (399 ) 
  
 
 
     
 
 
  
Income tax provision
    $ 1,073    $ 130
  
 
 
     
 
 
  
A reconciliation between the U.S. federal statutory income tax and the Company’s effective tax rates as a percentage of loss before income taxes is as follows:
 
    
Year Ended
January 31,
  
    
2021
    
2020
  
Provision computed at federal statutory rate
      21.0 %      21.0  % 
States taxes, net of federal benefit
      2.4       2.4  
Foreign rate differential
      (0.8 )      (1.0 ) 
Revaluation gain/loss
      (5.0 )      0.1  
Tax credits
      2.3       2.0  
Change in valuation allowance
      (21.3 )      (23.9 ) 
Other
      0.5       (0.7 ) 
  
 
 
    
 
 
  
Effective tax rate
      (0.9 )%      (0.1 )% 
  
 
 
    
 
 
  
 
 
The components of the Company’s deferred tax assets and liabilities are as follows:
 
    
Year Ended January 31,
  
(in thousands)
   
2021
     
2020
  
Deferred tax assets
      
Net operating loss carryforwards
    $ 92,570    $ 78,452
Tax Credit carryforwards
      17,679      14,772
Stock-based compensation
      4,013      3,033
Deferred revenue
      5,239      10,356
Excess interest expense
      6,799      4,253
Other
      4,826      4,040
  
 
 
     
 
 
  
Total deferred tax assets
      131,126      114,906
Valuation allowance
      (126,270 )       (102,758 ) 
  
 
 
     
 
 
  
Total deferred tax assets
      4,856      12,148
Deferred tax liabilities
      
Property and equipment
      —          (6,816 ) 
Intangible assets
      (4,432 )       (4,953 ) 
  
 
 
     
 
 
  
Total deferred tax liabilities
      (4,432 )       (11,769 ) 
  
 
 
     
 
 
  
Net deferred tax assets
    $ 424    $ 379
  
 
 
     
 
 
  
The Company had deferred tax assets of $131.1 million and $114.9 million before valuation allowances as of January 31, 2021 and 2020, respectively. The Company assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some or all of its deferred tax assets will not be realized. The Company evaluates all available positive and negative evidence such as past operating results, future reversals of existing deferred tax liabilities, projected future taxable income, as well as prudent and feasible tax-planning strategies. Management believes that it is more likely than not that the majority of U.S. and foreign deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance against its deferred tax assets in these jurisdictions.
The net change in the total valuation allowance is as follows:
 
    
Year Ended January 31,
  
(in thousands)
   
2021
     
2020
  
Valuation allowance, beginning of year
    $ 102,758    $ 73,155
Change in valuation allowance
      23,512      29,603
  
 
 
     
 
 
  
Valuation allowance, end of year
    $ 126,270    $ 102,758
  
 
 
     
 
 
  
The Company considers the undistributed earnings of its foreign subsidiaries permanently reinvested in foreign operations and has not provided for U.S. income taxes on such earnings. As of January 31, 2021, the Company’s unremitted earnings from its foreign subsidiaries were $1.4 million and the corresponding unrecognized deferred U.S. income tax liability is not material.
As of January 31, 2021, the Company had approximately $384.8 million of federal, $163.2 million of state and $1.3 million of foreign net operating loss (“
NOL
”) carryforwards available to offset future taxable income, which will expire in varying amounts beginning in 2022. An insignificant amount of NOL and credits carryforwards may be subject to annual limitations under Internal Revenue Code Section 382.
 
 
As of January 31, 2021, the Company had approximately $13.7 million of federal and $9.8 million of California research and development credit carryforwards available to reduce future taxable liability. The federal credit carryforwards will expire beginning in 2032 and California credits can be carried forward indefinitely.
The Company’s unrecognized tax benefits are as follows:
 
    
Year Ended
January 31,
  
(in thousands)
   
2021
     
2020
  
Beginning of year
    $ 3,918    $ 3,234
Additions based on tax positions related to the current year
      796      684
  
 
 
     
 
 
  
End of year
    $ 4,714    $ 3,918
  
 
 
     
 
 
  
As of January 31, 2021, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for taxes. The Company determined that no accrual for interest and penalties was required as of January 31, 2021 and 2020 and no such expenses were incurred in the years presented.
The Company does not anticipate the total amounts of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
The Company files U.S. federal, various state and foreign income tax returns. The Company is not currently under audit by any taxing authorities. All tax years remain open to examination by taxing jurisdictions to which the Company is subject.