XML 108 R25.htm IDEA: XBRL DOCUMENT
v3.19.3

Income Taxes | 12 Months Ended
--- | ---
Jul. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Note 17—Income Taxes On December 22, 2017, the U.S. government enacted "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018", which is commonly referred to as "The Tax Cuts and Jobs Act" (the "Tax Act"). The Tax Act reduced the U.S. federal statutory corporate tax rate from 35.0% to 21.0% effective January 1, 2018, required companies to pay a one-time repatriation tax on earnings of certain foreign subsidiaries that were previously tax deferred ("transition tax"), and made other changes to the U.S. income tax code. Due to the Company's July 31 fiscal year-end, the lower corporate income tax rate is phased in, resulting in a blended U.S. federal statutory tax rate of approximately 26.9% for the Company's fiscal 2018, and 21.0% for the Company's fiscal years thereafter. The Company has completed its accounting for the income tax effects of the Tax Act. In fiscal 2018, the Company estimated the effect of the Tax Act on its existing AMT credit carry-over and transition tax. Because the AMT credit will be refundable if not utilized in the four years subsequent to fiscal 2018, the Company reversed the valuation allowance that offset the AMT credit. As a result, the Company recorded a noncurrent receivable and an income tax benefit of $3.3 million for the anticipated refund. The reduction in the corporate tax rate did not impact the Company's results of operations or financial position because the income tax benefit from the reduced rate was offset by the valuation allowance. The transition tax is based on total post-1986 earnings and profits which were previously deferred from U.S. income taxes. In fiscal 2018, the Company estimated that it would utilize $12 million of federal net operating loss carryforwards to offset the transition tax that it expected to incur. In fiscal 2019, the Company adjusted this amount to $11 million of federal net operating loss carryforwards usage. These net operating loss carryforwards have a full valuation allowance and as such there was no impact on the Company's results of operations. The global intangible low taxed income ("GILTI") and base erosion anti-abuse tax ("BEAT") became effective for the Company on August 1, 2018. The Company booked an inclusion to its U.S. income of $0.6 million to reflect the impact. As a result of the Company's fully reserved net operating losses in the United States, there was no impact on its tax provision as a result of GILTI. The Company also had no impact from the BEAT. The Company anticipates that its assumptions may change as a result of future guidance and interpretation from the Internal Revenue Service or other taxing jurisdictions, and any additional adjustments will be made at that time. The Company's cumulative undistributed foreign earnings are included in accumulated deficit in the Company's consolidated balance sheets and consisted of approximately $337 million at July 31, 2019. The Company has concluded that the earnings remain permanently reinvested. The Tax Act moved toward a territorial tax system through the provision of a 100% dividends received deduction for the foreign-source portions of dividends received from controlled foreign subsidiaries. The components of income before income taxes are as follows:
Year ended July 31 (in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | 6,827 |  |  | $ | 910 |  |  | $ | (3,161 | )
Foreign |  |  | (6,374 | ) |  |  | 7,191 |  |  |  | 10,781 |
INCOME BEFORE INCOME TAXES |  | $ | 453 |  |  | $ | 8,101 |  |  | $ | 7,620 |
Significant components of the Company's deferred income tax assets consist of the following:
July 31 (in thousands) |  | 2019 |  |  | 2018 |
Deferred income tax assets: |  |  |  |  |  |
Bad debt reserve |  | $ | 540 |  |  | $ | 455 |
Accrued expenses |  |  | 3,134 |  |  |  | 3,758 |
Stock options and restricted stock |  |  | 866 |  |  |  | 1,070 |
Charitable contributions |  |  | 734 |  |  |  | 946 |
Depreciation |  |  | 151 |  |  |  | 349 |
Unrealized gain |  |  | (231 | ) |  |  | — |
Net operating loss |  |  | 72,625 |  |  |  | 75,110 |
Transaction taxes |  |  | 2,000 |  |  |  | — |
Deferred revenue |  |  | (1,060 | ) |  |  | — |
Total deferred income tax assets |  |  | 78,759 |  |  |  | 81,688 |
Valuation allowance |  |  | (74,170 | ) |  |  | (76,020 | )
NET DEFERRED INCOME TAX ASSETS |  | $ | 4,589 |  |  | $ | 5,668 |
In fiscal 2018, in addition to the reduction in the Company's deferred tax assets as a result of the reduction in the corporate tax rate and the transition tax, the Company's deferred tax assets and offsetting valuation allowance each decreased by $6 million due to the Rafael Spin-Off. The (provision for) benefit from income taxes consists of the following:
Year ended July 31 (in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | 3,294 |  |  | $ | — |
State and local |  |  | (15 | ) |  |  | (34 | ) |  |  | (26 | )
Foreign |  |  | 971 |  |  |  | 11 |  |  |  | (282 | )
|  |  | 956 |  |  |  | 3,271 |  |  |  | (308 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | — |  |  |  | (9,536 | )
State and local |  |  | 1 |  |  |  | 12 |  |  |  | (66 | )
Foreign |  |  | (1,080 | ) |  |  | (6,185 | ) |  |  | 11,931 |
|  |  | (1,079 | ) |  |  | (6,173 | ) |  |  | 2,329 |
(PROVISION FOR) BENEFIT FROM INCOME TAXES |  | $ | (123 | ) |  | $ | (2,902 | ) |  | $ | 2,021 |
The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes provided are as follows:
Year ended July 31 (in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. federal income tax at statutory rate |  | $ | (95 | ) |  | $ | (2,186 | ) |  | $ | (2,667 | )
Transition tax on foreign earnings |  |  | 92 |  |  |  | (3,360 | ) |  |  | — |
Valuation allowance |  |  | 2,008 |  |  |  | 58,798 |  |  |  | 626 |
Foreign tax rate differential |  |  | (2,835 | ) |  |  | (4,272 | ) |  |  | 3,107 |
Nondeductible expenses |  |  | (657 | ) |  |  | 213 |  |  |  | 457 |
Other |  |  | 1 |  |  |  | (23 | ) |  |  | 64 |
Prior year tax benefit |  |  | 2,271 |  |  |  | 575 |  |  |  | 494 |
Tax law changes |  |  | (896 | ) |  |  | (52,631 | ) |  |  | — |
State and local income tax, net of federal benefit |  |  | (12 | ) |  |  | (16 | ) |  |  | (60 | )
(PROVISION FOR) BENEFIT FROM INCOME TAXES |  | $ | (123 | ) |  | $ | (2,902 | ) |  | $ | 2,021 |
At July 31, 2019, the Company had federal net operating loss carryforwards of approximately $155 million. These carry-forward losses are available to offset future U.S. federal taxable income. The net operating loss carryforwards started to expire in fiscal 2018. The Company has foreign net operating losses of approximately $143 million, of which approximately $120 million does not expire, approximately $22 million expires in two to ten years and $1 million expires in twenty years. These foreign net operating losses are available to offset future taxable income in the countries in which the losses were incurred. The Company's subsidiary, net2phone, which provides voice over Internet protocol communications services, has additional federal net operating losses of approximately $70 million, which will expire through fiscal 2027. With the reacquisition of net2phone by the Company in March 2006, its losses were limited under Internal Revenue Code Section 382 to approximately $7 million per year. The net operating losses do not include any excess benefits related to stock options or restricted stock. The change in the valuation allowance is as follows:
Year ended July 31 (in thousands) |  | Balance at beginning of year |  |  | Additions charged to costs and expenses |  |  | Deductions |  |  | Balance at end of year |
2019 |  |  |  |  |  |  |  |  |  |  |  |
Reserves deducted from deferred income taxes, net: |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance |  | $ | 76,020 |  |  | $ | — |  |  | $ | (1,850 | ) |  | $ | 74,170 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Reserves deducted from deferred income taxes, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance |  | $ | 129,872 |  |  | $ | — |  |  | $ | (53,852 | ) |  | $ | 76,020 |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Reserves deducted from deferred income taxes, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Valuation allowance |  | $ | 130,498 |  |  | $ | 16,017 |  |  | $ | (16,643 | ) |  | $ | 129,872 |
In fiscal 2017, the Company determined that its valuation allowance on the losses of Elmion Netherlands B.V., a Netherlands subsidiary, was no longer required due to an internal reorganization that generated income and a projection of net income in future periods. The Company recorded a benefit from income taxes of $16.6 million in fiscal 2017 from the full recognition of the Elmion Netherlands B.V. deferred tax assets. In addition, in fiscal 2017, the Company determined that it would not be able to utilize its deferred tax assets in the United States and recorded a valuation allowance of $11.1 million against them. At July 31, 2019 and 2018, the Company did not have any unrecognized income tax benefits. There were no changes in the balance of unrecognized income tax benefits in fiscal 2019, fiscal 2018 and fiscal 2017. At July 31, 2019, the Company did not expect any changes in unrecognized income tax benefits during the next twelve months. In fiscal 2019, fiscal 2018 and fiscal 2017, the Company did not record any interest and penalties on income taxes. At July 31, 2019 and 2018, there was no accrued interest included in current income taxes payable. In September 2017, the Company, IDT Domestic Telecom, Inc. (a subsidiary of the Company) and certain other affiliates, were certified by the New Jersey Economic Development Authority as having met all of the requirements of the Grow New Jersey Assistance Act Tax Credit Program. The corporation business tax credits to be received are a maximum of $21.1 million. The Company may claim a portion of the tax credit each tax year for ten years beginning in 2018. The tax credit can be applied to 100% of the Company's New Jersey tax liability each year, and the unused amount of the annual credit can be carried forward. In addition, the Company may apply for a tax credit transfer certificate to sell unused tax credits to another business. The tax credits must be sold for no less than 75% of the value of the tax credits. The tax credits are subject to reduction, forfeiture and recapture if, among other things, the number of full-time employees declines below the program or statewide minimum. The Company has yet to receive the credit. The Company currently remains subject to examinations of its tax returns as follows: U.S. federal tax returns for fiscal 2016 to fiscal 2019, state and local tax returns generally for fiscal 2015 to fiscal 2019 and foreign tax returns generally for fiscal 2015 to fiscal 2019.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration