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INCOME TAXES | 12 Months Ended
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Jan. 31, 2018
INCOME TAXES |
INCOME TAXES | NOTE 14 — INCOME TAXES The Tax Cuts and Jobs Act (the “Act”) was signed into law on December 22, 2017 and significantly changes tax law in the United States by, among other items, reducing the federal corporate income tax rate from a maximum of 35% to 21% (effective January 1, 2018). As a result, the Company’s blended federal statutory income tax rate for the year ended January 31, 2018 is 33.81%. The Act embraces a territorial system for the taxation of future foreign earnings and modifies certain business deductions by, among other changes, repealing the domestic production activities deduction, further limiting the deductibility of certain executive compensation and increasing the limitation on the deductibility of certain meals and entertainment expenses. On the other hand, the Act permits 100% bonus depreciation on assets placed in service through 2022 (with a phase-out period through 2026). Other than the effect of the tax rate change, the net effect of these tax law changes reflected in income tax expense for the year ended January 31, 2018 was not material. The full effects of these changes will be reflected for the first time in the determination of income tax expense for the year ending January 31, 2019. The Company determined that it had no liability as of January 31, 2018 for the one-time transition tax on deemed repatriated earnings of foreign subsidiaries imposed by the Act. The Company will evaluate the impact of the Global Intangible Low-Taxed Income (“GILTI”) provision of the Act, beginning with the year ending January 31, 2019, the year for which it will first apply. The FASB has issued guidance stating that a company may elect to treat the additional taxes due in the United States as a result of GILTI inclusions as current period expenses when incurred or to include such amounts in the company’s determination of deferred taxes. The Company has not yet elected a method and will do so once the impact of GILTI has been evaluated. As a result of the reduction in the federal corporate income tax rate, the Company revalued its deferred taxes as of December 22, 2017 and recognized an income tax benefit of approximately $0.8 million for the year ended January 31, 2018. As the Company completes its analysis of the Act, collects and prepares necessary data, and interprets any additional guidance issued by the Internal Revenue Service (the “IRS”) and other regulatory or standard-setting bodies, the Company may make adjustments that may materially impact the Company’s income tax expense for the period in which adjustments are made. The components of income tax expense (benefit) for the years ended January 31, 2018, 2017 and 2016 are presented below:
|  | 2018 |  | 2017 |  | 2016 |
Current: |  |  |  |  |  |  |
Federal |  | $ | 32,490 |  | $ | 29,681 |  | $ | 16,458 |
State |  | 7,853 |  | 6,188 |  | 5,423 |
|  | 40,343 |  | 35,869 |  | 21,881 |
Deferred: |  |  |  |  |  |  |
Federal |  | (2 | ) | 1,277 |  | 2,950 |
State |  | (62 | ) | (40 | ) | 471 |
|  | (64 | ) | 1,237 |  | 3,421 |
Income tax expense |  | $ | 40,279 |  | $ | 37,106 |  | $ | 25,302 |
The Company’s income tax expense amounts for the years ended January 31, 2018, 2017 and 2016 differed from the expected income tax expense amounts computed by applying the federal corporate income tax rates of 33.81%, 35% and 35%, respectively, to income before income taxes for the periods as shown in the table below.
|  | 2018 |  | 2017 |  | 2016 |
Computed “expected” income tax |  | $ | 38,078 |  | $ | 40,086 |  | $ | 26,427 |
Increase (decrease) resulting from: |  |  |  |  |  |  |
State income taxes, net of federal benefit |  | 5,042 |  | 4,001 |  | 4,030 |
Domestic production activities deduction |  | (3,204 | ) | (2,906 | ) | (1,635 | )
Stock option exercises |  | (962 | ) | (4,969 | ) | — |
Exclusion of non-controlling interests |  | (113 | ) | (2,484 | ) | (4,823 | )
Other permanent differences, net |  | 1,254 |  | 1,933 |  | 1,557 |
Impact of federal tax rate change on deferred taxes |  | (789 | ) | — |  | — |
Adjustments and other differences |  | 973 |  | 1,445 |  | (254 | )
Income tax expense |  | $ | 40,279 |  | $ | 37,106 |  | $ | 25,302 |
For the years ended January 31, 2018, 2017 and 2016, the income tax expense amounts reflect the unfavorable income tax effects of state income taxes, net of federal income tax benefit. The favorable income tax effects of permanent differences for each year relate primarily to the domestic manufacturing deduction and the exclusion from taxable income of the income attributable to the non-controlling interests in the joint ventures that are not included in the Company’s reporting group for income tax purposes. Also, during the years ended January 31, 2018 and 2017, there were favorable income tax effects related to the recognition of the excess income tax benefits associated with stock options exercised during the corresponding year. Other permanent differences include the unfavorable income tax effects of the exclusion of certain meal and travel expenses (relating primarily to employees assigned to out-of-town construction projects) for each year presented above, goodwill impairment losses for the years ended January 31, 2018 and 2017 and nondeductible executive compensation for the years ended January 31, 2017 and 2016. The effects of foreign income taxes for the years ended January 31, 2018, 2017 and 2016 were not material. The Company does not have any unremitted foreign earnings as the foreign operations have incurred a cumulative net operating loss since the acquisition of APC in May 2015. The Company has commenced a review of the activities of its engineering staff in order to identify and quantify the amounts of research and development credits, if any, for use in reducing prior and current year income taxes. As this study was not commenced until late in the year ended January 31, 2018, the Company has not developed any estimates of the amounts of potential tax credits to which it may be entitled. Accordingly, no income tax benefit related to research and development credits has been reflected in the amount of income tax expense recorded by the Company for the year ended January 31, 2018 or any prior year. As of January 31, 2018 and 2017, the consolidated balance sheets included prepaid income taxes in the amounts of $7.9 million and $3.9 million, respectively. As of January 31, 2018, the Company does not believe that it has any material uncertain income tax positions reflected in its accounts. The tax effects of temporary differences that gave rise to deferred tax assets and liabilities as of January 31, 2018 and 2017 included the following:
|  | 2018 |  | 2017 |
Assets: |  |  |  |  |
Net operating loss carryforwards |  | $ | 2,635 |  | $ | 3,487 |
Stock options |  | 2,042 |  | 1,594 |
Purchased intangibles |  | 864 |  | 1,592 |
Accrued expenses and other |  | 862 |  | 2,052 |
|  | 6,403 |  | 8,725 |
Liabilities: |  |  |  |  |
Purchased intangibles |  | (3,664 | ) | (4,428 | )
Construction contracts |  | (1,896 | ) | (2,862 | )
Property and equipment and other |  | (1,683 | ) | (2,389 | )
|  | (7,243 | ) | (9,679 | )
Net deferred tax liabilities |  | $ | (840 | ) | $ | (954 | )
The Company acquired unused net operating losses (“NOLs”) for federal income tax reporting purposes from TRC that are subject to limitations imposed by Section 382 of the Internal Revenue Code of 1986, as amended. These losses are subject to annual limits that reduce the aggregate amount of NOLs available to the Company in the future to approximately $7.5 million. These NOLs are available to offset future taxable income and, if not utilized, begin expiring during 2032. The Company also has certain NOLs that will be available to the Company for state income tax reporting purposes that are substantially similar to the federal NOLs. Additionally, the Company has NOLs in the total amount of $4.3 million available to offset future taxable income in the Republic of Ireland, which may be carried forward indefinitely. The Company’s ability to realize deferred tax assets, including those related to the NOLs discussed above, depends primarily upon the generation of sufficient future taxable income to allow for the utilization of the Company’s deductible temporary differences and tax planning strategies. If such estimates and assumptions change in the future, the Company may be required to record valuation allowances against some or all of its deferred tax assets resulting in additional income tax expense in the future. At this time, based substantially on the strong earnings performance of the Company’s power industry services reporting segment, management believes that it is more likely than not that the Company will realize the benefit of significantly all of its deferred tax assets. The Company is subject to income taxes in the United States of America, the Republic of Ireland, the United Kingdom and various other state and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is no longer subject to income tax examinations by tax authorities for its fiscal years ended on or before January 31, 2014 except for several notable exceptions including the Republic of Ireland, the United Kingdom and several states where the open periods are one year longer. The Company received notice from the IRS on November 7, 2017 that its federal consolidated tax return for the tax year ended January 31, 2016 has been selected for audit. At this time, the Company does not have reason to expect any material changes to its income tax liability resulting from the outcome of this audit. The amounts of interest and penalties related to income taxes that were incurred by the Company during the years ended January 31, 2018, 2017 and 2016 were not material.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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