XML 31 R19.htm IDEA: XBRL DOCUMENT v3.22.2.2
INCOME TAXES
 6 Months Ended
Jul. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES 
Our interim provision for income taxes is measured using an estimated annual effective income tax rate, adjusted for discrete items that occur within the periods presented.

For the three months ended July 31, 2022, we recorded an income tax provision of $2.8 million on pretax income of $0.6 million, which represented an effective income tax rate of 465.4%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a discrete income tax provision of $2.1 million attributable to the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction and the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions. Excluding the discrete income tax provision attributable to the foreign jurisdiction valuation allowance, the result was an income tax provision of $0.7 million on pre-tax income of $0.6 million resulting in an effective tax rate of 124.8%.

For the three months ended July 31, 2021, we recorded an income tax provision of $4.2 million on pretax income of $9.5 million, which represented an effective income tax rate of 44.1%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign activities and the impact of a tax rate change in a foreign jurisdiction, offset by a change in the fair value of the Future Tranche Right associated with the Preferred stock issuance and by lower statutory rates in several foreign jurisdictions.

For the six months ended July 31, 2022, we recorded an income tax provision of $3.1 million on pretax income of $1.5 million, which represented an effective income tax rate of 212.1%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to a discrete income tax provision of $2.1 million attributable to the recording of a valuation allowance against a deferred tax asset related to an asset held for sale in a foreign jurisdiction and the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions. Excluding the discrete income tax provision attributable to the foreign jurisdiction valuation allowance, the result was an income tax provision of $1.0 million on pre-tax income of $1.5 million resulting in an effective tax rate of 71.5%.

For the six months ended July 31, 2021, we recorded an income tax provision of $4.1 million on pretax income of $10.5 million, which represented an effective income tax rate of 39.2%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the impact of U.S. taxation of certain foreign activities and the impact of a tax rate change in a foreign jurisdiction, offset by a change in the fair value of the Future Tranche Right associated with the Series A Preferred Stock and by lower statutory rates in several foreign jurisdictions.

As required by the authoritative guidance on accounting for income taxes, we evaluate the realizability of deferred income tax assets on a jurisdictional basis at each reporting date. Accounting guidance for income taxes requires that a valuation allowance be established when it is more-likely-than-not that all or a portion of the deferred income tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred income tax assets are not more-likely-than-not realizable, we establish a valuation allowance. We determined that there is sufficient negative evidence to maintain the valuation allowances against certain state and foreign deferred income tax assets as a result of historical losses in the most recent three-year period in certain state and foreign jurisdictions, and with respect to the foreign deferred income tax asset related to an asset held for sale, as a result of the differences between the fair market value and the tax basis of the asset. We intend to maintain valuation allowances until sufficient positive evidence exists to support a reversal.

We had unrecognized income tax benefits of $84.0 million and $84.2 million (excluding interest and penalties) as of July 31, 2022 and January 31, 2022, respectively, that if recognized, would impact our effective income tax rate. The accrued liability for interest and penalties was $3.7 million and $3.4 million at July 31, 2022 and January 31, 2022, respectively. Interest and penalties are recorded as a component of the provision for income taxes in our condensed consolidated statements of operations. We regularly assess the adequacy of our provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. As a result, we may adjust the reserves for unrecognized income tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitation. Further, we believe that it is reasonably possible that the total amount of unrecognized income tax benefits at July 31, 2022 could decrease by approximately $0.4 million in the next twelve months as a result of settlement of certain tax audits or lapses of statutes of limitation. Such decreases may involve the payment of additional income taxes, the adjustment of deferred income taxes including the need for additional valuation allowances, and the recognition of income tax benefits. Our income tax returns are subject to ongoing tax examinations in several jurisdictions in which we operate. We also believe that it is reasonably possible that new issues may be raised by tax authorities or developments in tax audits may occur, which would require increases or decreases to the balance of reserves for unrecognized income tax benefits; however, an estimate of such changes cannot reasonably be made.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The
income tax provisions of the CARES Act do not have a significant impact on our current taxes, deferred taxes, or uncertain tax positions. However, we have deferred the timing of employer payroll taxes and accelerated the refund of AMT credits as permitted by the CARES Act.