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Note 16 - Income Taxes
 9 Months Ended
Jul. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16.

Income Taxes

 

The Company’s income tax expense for the three and nine months ended July 31, 2023 was $14.6 million and $25.9 million, respectively, and $29.3 million and $58.4 million, respectively, for the same periods in the prior year. For both the three and nine months ended July 31, 2023, and both of the prior year periods, the expense was primarily due to federal and state tax expense recorded as a result of our income before income taxes. The state tax expense for the three and nine months ended July 31, 2023 included the release of a $3.9 million valuation allowance as a result of a change in tax law. The federal tax expense for the nine months ended July 31, 2023 included a $6.2 million benefit from energy efficient tax credits. The federal tax expense is not paid in cash as it is offset by the use of our existing NOL carryforwards.

 

We have remaining federal NOL carryforwards of $812.9 million that expire between 2030 and 2038, and $15.7 million have an indefinite carryforward period. Our total remaining state NOL carryforwards are $2.3 billion: $412.4 million that expire between 2023 through 2027; $1.4 billion that expire between 2028 through 2032; $369.7 million that expire between 2033 through 2037; $73.7 million that expire between 2038 through 2042; and $51.6 million that have an indefinite carryforward period.

 

The Company recognizes deferred tax assets, net of deferred tax liabilities, related to NOL carryforwards, tax credits and temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income. Our deferred tax assets, net as of July 31, 2023 were $324.7 million compared to $344.8 million at October 31, 2022. A valuation allowance is provided to offset deferred tax assets ("DTAs") if, based upon available evidence, it is more likely than not that some or all of the DTAs will not be realized. We had a valuation allowance of $91.8 million as of July 31, 2023 compared to $95.7 million as of October 31, 2022 related to DTAs for tax credits and state NOL carryforwards that are expected to expire before they can be used.

 

We considered all available positive and negative evidence to determine whether, based on the weight of that evidence, the valuation allowance for our DTAs was appropriate. Overall, the positive evidence, both objective and subjective, outweighed the negative evidence. The significant improvement in our profitability over the last three years, coupled with our current contract backlog, provided positive evidence to support the conclusion that sufficient taxable income will be generated in the future and a full valuation allowance is not necessary.