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Income Taxes

12 Months Ended

Oct. 31, 2020

9. Income Taxes

On March 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act is a relief package intended to assist many aspects of the Country’s economy of which certain components of the Act impacted the Company's 2020 income tax provision. We recorded approximately $1.1 million of tax benefit as a result of the provision allowing taxpayers to carry back net operating losses to offset taxable income on previously filed tax returns.

The Company determined that certain foreign earnings to be indefinitely reinvested outside the United States. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to foreign tax authorities.

The income tax provision (benefit) consists of the following for the years ended October 31, (in thousands):


	2020		2019		2018

Current:
Federal	$	(5,684)	$	9,146	$	7,115
State		(214)		2,516		1,582
Foreign		645		290		(844)
Total current		(5,253)		11,952		7,853

Deferred:
Federal		575		516		3,328
State		(505)		209		690
Foreign		260		205		848
Total deferred		330		930		4,866
Change in valuation allowance		631		—		—
Total income tax provision (benefit)	$	(4,292)	$	12,882	$	12,719

At October 31, 2020 and 2019, gross deferred tax assets totaled approximately $31.5 million and $18.5 million, while gross deferred tax liabilities totaled approximately $28.4 million and $15.0 million. Deferred income taxes reflect the net of temporary differences between the carrying amount of assets and liabilities for financial reporting and income tax purposes.

Significant components of our deferred taxes assets (liabilities) as of October 31, are as follows (in thousands):


	2020		2019

Property, plant, and equipment		(11,552)		(10,407)
Intangible assets		6,861		11,805
Unrealized gain, Limoneira investment		(116)		(2,352)
Investment in FreshRealm		1,096		(1,513)
Stock-based compensation		812		857
State taxes		(592)		(437)
Credits and incentives		1,345		1,109
Allowance for accounts receivable		1,165		834
Inventories		864		445
Accrued liabilities		2,119		3,423
Operating lease - Right of use assets		(15,732)		—
Operating lease liabilities		16,895		—
Net operating loss		369		—
Valuation allowance		(631)		—
Other		(417)		(317)
Long-term deferred income taxes	$	2,486	$	3,447

As of October 31, 2020, the Company has gross federal net operating losses of $8 million that are expected to be carried back to one of the five preceding tax years and do not expire, and gross state net operating loss carryforwards of approximately $7.2 million with carryforward periods primarily ranging from 20 years to indefinite.

The Company records a valuation allowance against deferred tax assets when determined that all or a portion of the deferred tax assets are not more likely than not to be realized based on all available evidence. As of October 31, 2020, the Company recorded an approximate $0.6 million valuation allowance against the deferred tax assets for state tax credit carryforwards that are more likely than not to expire unutilized between 2022 and 2028.

A reconciliation of the significant differences between the federal statutory income tax rate and the effective income tax rate on pretax income for the years ended October 31, is as follows:


	2020		2019		2018

Federal statutory tax rate	21.0	%	21.0	%	23.3	%
State taxes, net of federal effects	4.4		3.7		3.6
NOL carryback - CARES Act	6.2		—		—
Foreign income taxes greater than U.S.	(2.3)		0.4		0.7
Revaluation of deferred taxes	—		—		4.5
Section 199 deduction	—		—		(1.9)
Provision to return	(2.5)		0.7		(1.2)
Transition Tax	—		—		0.6
State rate change	(0.1)		(0.2)		0.2
Valuation allowance	(2.7)		—		—
Other	(0.3)		0.4		(1.4)
	23.7	%	26.0	%	28.4	%

For fiscal years 2020, 2019 and 2018, income (loss) before income taxes (benefit) related to domestic operations was approximately $(18.9) million, $47.9 million, and $45.8 million. For fiscal years 2020, 2019 and 2018, income (loss) before income taxes (benefit) related to foreign operations was approximately $0.8 million, $1.6 million and $(1.1) million.

As of October 31, 2020 and 2019, we had liability of $0.1 million and $0.1 million for unrecognized tax benefits related to various foreign income tax matters.

We are subject to U.S. federal income tax as well as income of multiple state tax and foreign tax jurisdictions. We are no longer subject to U.S. income tax examinations for the fiscal years prior to October 31, 2017, and are no longer subject to state income tax examinations for fiscal years prior to October 31, 2016.

- 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.

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