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INCOME TAXES | 12 Months Ended
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Jan. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | The provision for income taxes is based on the following pretax income (loss):
|  | Years ended January 31,
Domestic and Foreign Pretax Income (Loss) |  | 2020 |  | 2019
Domestic |  | $ | 466 |  |  | $ | (1,116 | )
Foreign |  |  | 5,287 |  |  |  | 4,597 |
Total |  | $ | 5,753 |  |  | $ | 3,481 |
|  | Years ended January 31,
|  | 2020 |  | 2019
Income Tax Expense |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | 16 |  |  | $ | 45 |
State and other taxes |  |  | 38 |  |  |  | 20 |
Foreign |  |  | 1,090 |  |  |  | 1,667 |
Total Current Tax Expense |  | $ | 1,144 |  |  | $ | 1,732 |
Deferred: |  |  |  |  |  |  |  |
Domestic |  | $ | 1,328 |  |  | $ | 290 |
Total Income Taxes |  | $ | 2,472 |  |  | $ | 2,022 |
The following is a reconciliation of the effective income tax rate to the Federal statutory rate:
|  | Years ended January 31,
|  | 2020 |  | 2019
Statutory rate |  |  | 21.00 | % |  |  | 21.00 | %
State Income Taxes, Net of Federal Tax Benefit |  |  | 4.47 |  |  |  | 6.89 |
Adjustment to Deferred |  |  | 0.70 |  |  |  | (0.92 | )
Argentina Flow Through Loss |  |  | (0.24 | ) |  |  | 1.37 |
GILTI |  |  | 17.96 |  |  |  | 16.85 |
Permanent Differences |  |  | 2.47 |  |  |  | 0.63 |
Valuation Allowance-Deferred Tax Asset |  |  | ----- |  |  |  | (24.46 | )
Foreign Tax Credit |  |  | ----- |  |  |  | 24.46 |
Foreign Rate Differential |  |  | (3.51 | ) |  |  | 20.16 |
Rate Change |  |  | 0.20 |  |  |  | (5.63 | )
Other |  |  | (0.08 | ) |  |  | (2.25 | )
Effective Rate |  |  | 42.97 | % |  |  | 58.09 | %
The tax effects of temporary cumulative differences which give rise to deferred tax assets at January 31, 2020 and 2019 are summarized as follows:
|  | Years ended January 31,
|  | 2020 |  | 2019
Deferred tax assets: |  |  |  |  |  |  |  |
Inventories |  | $ | 672 |  |  | $ | 849 |
US tax loss carryforwards, including work opportunity credit* |  |  | 3,524 |  |  |  | 4,290 |
Accounts receivable and accrued rebates |  |  | 247 |  |  |  | 233 |
Accrued compensation and other |  |  | 179 |  |  |  | 314 |
India reserves - US deduction |  |  | 45 |  |  |  | 46 |
Equity based compensation |  |  | 171 |  |  |  | 299 |
Foreign tax credit carry-forward |  |  | 1,348 |  |  |  | 1,348 |
State and local carry-forwards |  |  | 990 |  |  |  | 1,116 |
Argentina timing difference |  |  | 43 |  |  |  | 32 |
Depreciation and other |  |  | 55 |  |  |  | 59 |
Amortization |  |  | (206 | ) |  |  | (193 | )
Brazil write-down |  |  | 220 |  |  |  | 222 |
Right-of-use asset |  |  | 549 |  |  |  | ----- |
Operating Lease Liability |  |  | (550 | ) |  |  | ----- |
Deferred tax asset |  |  | 7,287 |  |  |  | 8,615 |
Less valuation allowance |  |  | (1,348 | ) |  |  | (1,348 | )
Net deferred tax asset |  | $ | 5,939 |  |  | $ | 7,267 |
*The federal net operating loss (“NOL”) generated from the 01/31/2015 tax year that is left after FY20 of approximately $16.0 million, will expire after 1/31/2035 and the NOL generated after 01/31/2018 will be carried forward indefinitely. The credits will begin to expire after 1/31/2020 (10 years from the 1st carryover year generated date of 1/31/2010) and will fully expire after 1/31/2028. At 1/31/2020, the Company had NOLs totaling approximately $15.98 million. The state NOLs with carry forward limitations will begin to expire after 1/31/2025 and will continue to expire at various periods up until 1/31/2039 when they will be fully expired. The states have a larger spread because some only carryforward for 10 years and some allow 20 years. The Georgia NOLs generated after 01/31/2018 can be carried forward indefinitely. At 1/31/2020, the Company had state NOLs totaling approximately $28.69 million. Tax Reform On December 22, 2017, federal tax reform legislation was enacted in the United States, resulting in significant changes from previous tax law. The 2017 Tax Cuts and Jobs Act (the Tax Act) reduced the federal corporate income tax rate to 21% from 35% effective January 1, 2018. The Tax Act requires us to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, re-measuring our US deferred tax assets as well as reassessing the net realizability of our deferred tax assets. The Company completed this re-measurement and reassessment in FY18. While the Tax Act provides for a modified territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The proposed regulations were not finalized as of January 31, 2019. The regulations were finalized as of June 14, 2019. Re-measurement and reassessment of the GILTI tax as it is currently written resulted in a charge to tax expense of $1.0 million and $0.6 million in FY20 and FY19, respectively. The Company intends to account for the GILTI tax in the period in which it is incurred. Though this non-cash expense (due to available NOL’s) had a materially negative impact on FY20 earnings, the Tax Act also changes the taxation of foreign earnings, and companies generally will not be subject to United States federal income taxes upon the receipt of dividends from foreign subsidiaries. The BEAT provisions in the Tax Act pertain to companies with average annual gross receipts of $500 million for the prior 3-year period and eliminate the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. Based on current guidelines the Company does not expect the BEAT provision to have an impact on U.S. tax expense. We previously considered substantially all of the earnings in our non-U.S. subsidiaries to be indefinitely reinvested outside the U.S. and, accordingly, recorded no deferred income taxes on such earnings. At this time, the applicable provisions of the Tax Act have been fully analyzed and our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. As stated above, GILTI is recognized in the period it is incurred and is not considered with regard to deferred income tax on unremitted E&P. All international subsidiaries are impacted by GILTI calculation. Income Tax Audits The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. Returns for the years since FY17 are still open based on statutes of limitation only. Chinese tax authorities have performed limited reviews on all Chinese subsidiaries as of tax years 2008 through 2018 with no significant issues noted and we believe our tax positions are reasonably stated as of January 31, 2020. Weifang Meiyang Products Co., Ltd. (“Meiyang”), one of our Chinese operations, was changed to a trading company from a manufacturing company in Q1 FY16 and all direct workers and equipment were transferred from Meiyang to Weifang Lakeland Safety Products Co., Ltd., (“WF”), another entity of our Chinese operation thereby reducing our tax exposure. The 2019 tax review will be performed before May 30, 2020 in China. Lakeland Protective Wear, Inc., our Canadian subsidiary, is subject to Canadian federal income tax, as well as income tax in the Province of Ontario. The normal reassessment period is four years from the date of reassessment. The January 31, 2017 tax return was assessed on September 13, 2017, so it and subsequent returns are within the normal reassessment period and open to examination by tax authorities. In connection with the exit from Brazil (Note 12), the Company claimed a worthless stock deduction which generated a tax benefit of approximately USD $9.5 million, net of a USD $2.2 million valuation allowance in FY16. While the Company and its tax advisors believe that this deduction is valid, there can be no assurance that the IRS will not challenge it and, if challenged, there is no assurance that the Company will prevail. As mentioned above, it’s the Company’s intention is to reinvest outside the US those earnings needed for working capital or foreign investment. As a result of the transition tax, $5.0 million of foreign income was repatriated at the end of FY18. However, the Company has no intention to repatriate earnings with regards with GILTI. In the fiscal year ended January 31, 2020, no dividends were declared. It is the Company’s practice and intention to reinvest the earnings of our non-US subsidiaries in their operations with the exception of the dividend plan. Change in Valuation Allowance We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. The valuation allowance did not change for the year ended January 31, 2020 and decreased $0.9 for the year ended January 31, 2019.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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