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INCOME TAXES | 12 Months Ended
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Jan. 31, 2022
INCOME TAXES |
INCOME TAXES | NOTE 13 – INCOME TAXES Reconciliations of Income Tax (Expense) Benefit The components of the amounts of income tax (expense) benefit for Fiscal 2022, Fiscal 2021 and Fiscal 2020 are presented below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021 |  | 2020
Current: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ | $ | (10,921) | ​ | $ | 6,654 | ​ | $ | 77
State | ​ |  | (643) | ​ |  | (83) | ​ |  | 336
​ | ​ |  | (11,564) | ​ |  | 6,571 | ​ |  | 413
Deferred: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ |  | 341 | ​ |  | (7,720) | ​ |  | 6,825
State | ​ |  | (133) | ​ |  | 75 | ​ |  | (185)
​ | ​ |  | 208 | ​ |  | (7,645) | ​ |  | 6,640
Income tax (expense) benefit | ​ | $ | (11,356) | ​ | $ | (1,074) | ​ | $ | 7,053
​ The amounts of interest and penalties related to income taxes that were incurred by the Company during Fiscal 2022, Fiscal 2021 and Fiscal 2020 were not material. Foreign income tax expense amounts for Fiscal 2022, Fiscal 2021 and Fiscal 2020 were not material. The Company’s income tax amounts differed from corresponding amounts computed by applying the federal corporate income tax rate of 21% to the income (loss) before income taxes for Fiscal 2022, Fiscal 2021 and Fiscal 2020 as presented below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2022 |  | 2021 |  | 2020
Computed expected income tax (expense) benefit | ​ | $ | (9,883) | ​ | $ | (5,226) | ​ | $ | 10,030
Difference resulting from: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
State income taxes, net of federal tax effect | ​ |  | (614) | ​ |  | (7) | ​ |  | 81
Excess executive compensation | ​ | ​ | (1,296) | ​ | ​ | (420) | ​ | ​ | (420)
Bad debt loss | ​ | ​ | (425) | ​ | ​ | 160 | ​ | ​ | 6,205
Foreign tax rate differential | ​ | ​ | 352 | ​ | ​ | 173 | ​ | ​ | (722)
Net operating loss carryback benefit (see discussion below) | ​ | ​ | — | ​ | ​ | 4,392 | ​ | ​ | —
Elimination of net operating loss benefits | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (7,239)
Goodwill impairment losses | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (763)
Other permanent differences and adjustments, net | ​ |  | 510 | ​ |  | (146) | ​ |  | (119)
Income tax (expense) benefit | ​ | $ | (11,356) | ​ | $ | (1,074) | ​ | $ | 7,053
​ A valuation allowance in the amount of $7.1 million was established against the deferred tax asset amount created by the net operating loss of APC’s subsidiary in the U.K. for Fiscal 2020. However, this effect was substantially offset by an income tax benefit for Fiscal 2020 in the amount of approximately $6.2 million that was the estimated favorable federal income tax impact of bad debt loss on certain loans made to APC from Argan, which were determined to be uncollectible during Fiscal 2020. A portion of the bad debt loss was reversed for Fiscal 2022 which resulted in charge to federal income tax expense for the period in the amount of $0.4 million. Net Operating Loss (“NOL”) Carryback In an effort to combat the adverse economic impacts of the COVID-19 crisis, the US Congress passed the Coronavirus, Aid, Relief, and Economic Security Act (the “CARES Act”) that was signed into law on March 27, 2020. This wide-ranging legislation was an emergency economic stimulus package that included spending and tax breaks aimed at strengthening the U.S. economy and funding a nationwide effort to curtail the effects of the outbreak of COVID-19. The tax changes of the CARES Act included a temporary suspension of the limitations on the future utilization of certain NOLs and re-established a carryback period for certain losses to five years. The NOLs eligible for carryback under the CARES Act include the Company’s domestic NOL for Fiscal 2020, which was approximately $39.5 million. The Company made the appropriate filing with the IRS requesting carryback refunds of income taxes paid for the years ended January 31, 2017, 2016 and 2015. A deferred tax asset in the amount of $8.3 million was recorded as of January 31, 2020 associated with the income tax benefit of the NOL for Fiscal 2020. With the enactment of the CARES Act, the asset was moved to income taxes receivable (included in other current assets in the consolidated financial statements as of January 31, 2022 and 2021) where the value was increased to approximately $12.7 million. The carryback provided a favorable rate benefit for the Company as the loss, which was incurred in a year where the statutory federal tax rate was 21%, has been carried back to tax years where the tax rate was higher. The net amount of this additional income tax benefit, approximately $4.4 million, was recorded in Fiscal 2021. Research and Development Tax Credits During Fiscal 2019, the Company completed a detailed review of the activities of its engineering staff on major EPC services projects in order to identify and quantify the amounts of research and development tax credits that may have been available to reduce prior year income taxes. This study focused on project costs incurred during the three-year period ended January 31, 2018. Based on the results of the study, management identified and estimated significant amounts of income tax benefits that were not previously recognized in the Company’s operating results for any prior year reporting period. The amount of research and development tax credit benefit recognized in Fiscal 2019 was $16.6 million. During Fiscal 2020, deferred tax assets related to the research and development tax credits were reduced by $0.4 million. As described below, the Internal Revenue Service (the “IRS”) has issued its revenue agents reports relating to the examinations of the Company’s consolidated federal income tax returns for Fiscal 2016, Fiscal 2017 and Fiscal 2018; the tax returns for the earlier two years were amended to include research and development tax credits. The amount of identified but unrecognized income tax benefits related to research and development tax credits as of January 31, 2022 and 2021 is $5.0 million, for which the Company has established a liability for uncertain income tax return positions, most of which is included in accrued expenses as of January 31, 2022 and 2021. The final outcome of these uncertain tax positions is not yet determinable. However, the Company does not expect that the amount of unrecognized tax benefits will significantly change due to any expiration of statutes of limitation over the next 12 months. However, it is possible that the disputes with the IRS related to the Company’s federal research and development tax credits (see discussion of income tax returns below) could be resolved within the next twelve months depending on the results of the scheduled appeals hearing with the IRS. If resolution of the disputes occurs, it would result in the Company’s elimination of at least a substantial portion of the amount of the liability for uncertain income tax positions discussed above. As of January 31, 2022, the Company does not believe that it has any other material uncertain income tax positions reflected in its accounts. As of January 31, 2022 and 2021, the balances of other current assets in the consolidated balance sheet included total income tax refunds receivable and prepaid income taxes in the amounts of approximately $29.5 million and $26.9 million, respectively. The income tax refunds include the amounts expected to be received from the IRS upon completion of the tax return examination appeals process identified below and the amount expected to be received from the IRS upon its processing of the Company’s NOL carryback refund request discussed above. Deferred Taxes The tax effects of temporary differences that are reflected in deferred taxes as of January 31, 2022 and 2021 included the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Net operating loss carryforwards | ​ | $ | 14,360 | ​ | $ | 14,192
Stock awards | ​ | ​ | 2,325 | ​ | ​ | 2,549
Lease liabilities | ​ | ​ | 772 | ​ | ​ | 775
Research and development credit carryforwards | ​ | ​ | 269 | ​ | ​ | 102
Purchased intangibles | ​ |  | 19 | ​ |  | 234
Accrued expenses and other | ​ |  | 1,828 | ​ |  | 1,422
​ | ​ |  | 19,573 | ​ |  | 19,274
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Purchased intangibles | ​ | ​ | (3,533) | ​ | ​ | (3,513)
Property and equipment | ​ |  | (1,334) | ​ |  | (1,801)
Construction contracts | ​ |  | (1,034) | ​ |  | (968)
Right-of-use assets | ​ | ​ | (768) | ​ | ​ | (770)
Other | ​ | ​ | (43) | ​ | ​ | (176)
​ | ​ |  | (6,712) | ​ |  | (7,228)
Valuation allowances | ​ | ​ | (12,404) | ​ | ​ | (11,797)
Deferred tax assets | ​ | $ | 457 | ​ | $ | 249
​ The Company acquired unused 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 $5.9 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. ​ 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 Company’s use of temporarily deferred deductions and tax planning strategies. If such estimates and assumptions change in the future, the Company may be required to record additional 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. Income Tax Returns The Company is subject to federal and state income taxes in the U.S., and income taxes in Ireland and the U.K. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations which require significant judgment to apply. The Company is no longer subject to income tax examinations by authorities for its fiscal years ended on or before January 31, 2018 except for several notable exceptions including Ireland, the U.K. and several states where the open periods are one year longer. The IRS conducted examinations of the Company’s amended federal consolidated income tax returns for Fiscal 2016 and Fiscal 2017, and the Company’s federal income tax return for Fiscal 2018 and has issued its final revenue agents reports that document its understanding of the facts, attempts to summarize the Company’s arguments in support of the research and development claims and states its position which disagrees with the Company’s treatment of a substantial amount of the costs that support the Company’s claims for Fiscal 2016, Fiscal 2017 and Fiscal 2018. The Company believes that its arguments are sound and that the reports do not present any new facts relating to the issues or make any new arguments that would cause it to make any adjustments to its accounting for the research and development claims as of January 31, 2022. The Company has submitted formal protests of the findings of the IRS examiner and is pursuing its income tax positions with the IRS through the established protest and appeals process. The Company has also formally protested the conclusions reached by two states, where the Company filed tax returns reflecting the benefits of certain research and development credits, that the credits are not allowable. The Company expects that the ultimate settlement of the income tax disputes will be resolved on bases favorable to the Company. Solar Energy Projects During Fiscal 2022 and Fiscal 2021, the Company invested approximately $5.0 million and $1.3 million, respectively, in limited liability companies that make equity investments in solar energy projects that are eligible to receive energy tax credits. The passive investments have been accounted for under the equity method and the net balances have been reported within other assets in our consolidated balance sheets. Each tax credit, when recognized, is recorded as a reduction of the corresponding investment balance with an offsetting reduction in the balance of accrued taxes payable in accordance with the deferral method, each representing a non-cash transaction. Investment tax credits in the approximate amounts of $4.5 million and $1.1 million were recognized during Fiscal 2022 and Fiscal 2021, respectively. As of January 31, 2022, the Company’s had no remaining cash investment commitments related to these projects. During Fiscal 2022 and Fiscal 2021, the corresponding investment balances were adjusted to reflect the Company’s share of the losses of the investment entities, which have been included as other expense in the Company’s consolidated statements of earnings. The Company has also established deferred taxes related to the differences in the book and tax bases of the investments. These investments are expected to provide positive overall returns over their six-year expected lives. Supplemental Cash Flow Information The amounts of cash paid for income taxes during Fiscal 2022, Fiscal 2021 and Fiscal 2020 were $14.0 million, $5.5 million and $3.1 million, respectively. During Fiscal 2022, Fiscal 2021 and Fiscal 2020, the Company received cash refunds of previously paid income taxes from various taxing authorities in the total amounts of $0.2 million, $1.0 million and $8.4 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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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