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Income Taxes | 12 Months Ended
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Jan. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax (benefit) expense for the last two years is reconciled to the statutory federal income tax rates of 21% for the tax years ended January 31, is as follows (in thousands):
| 2023 |  | 2022
Statutory | $ | 1,689 |  |  | $ | (782) |
State taxes (net of federal tax) | 746 |  |  | 14 |
Change in valuation allowance | (10,546) |  |  | 12,303 |
State rate adjustment | (397) |  |  | (197) |
Change in unrecognized tax benefits | 6 |  |  | 5 |
Stock compensation | 35 |  |  | 48 |
Expirations of attributes | 17 |  |  | 55 |
Permanent differences | (13) |  |  | (31) |
Return to provision | (41) |  |  | (7) |
Income tax (benefit) expense | $ | (8,504) |  |  | $ | 11,408 |
Significant components of the (benefit) expense for income taxes attributed to continuing operations are as follows for the years ended January 31, is as follows (in thousands):
| 2023 |  | 2022
Current |  |  |
Federal | $ | 82 |  |  | $ | — |
State | 125 |  |  | 92 |
| 207 |  |  | 92 |
Deferred |  |  |
Federal | 1,524 |  |  | (731) |
State | 311 |  |  | (256) |
| 1,835 |  |  | (987) |
Change in valuation allowance | (10,546) |  |  | 12,303 |
| (8,711) |  |  | 11,316 |
Income tax (benefit) expense | $ | (8,504) |  |  | $ | 11,408 |
Deferred tax assets and liabilities are comprised of the following as of January 31, respectively, as follows (in thousands):
| 2023 |  | 2022
Deferred tax assets |  |  |
Accrued vacation and sick leave | $ | 1,925 |  |  | $ | 943 |
Retirement plans | 2,729 |  |  | 3,930 |
Insurance reserves | 325 |  |  | 300 |
Warranty | 156 |  |  | 154 |
Net operating loss carryforwards | 1,949 |  |  | 4,445 |
Right of use liability | 3,087 |  |  | 4,159 |
Inventory | 1,820 |  |  | 2,124 |
Other | 401 |  |  | 361 |
| 12,392 |  |  | 16,416 |
Deferred tax liabilities |  |  |
Tax in excess of book depreciation | (987) |  |  | (984) |
Right of use assets | (2,630) |  |  | (3,567) |
Other | (111) |  |  | (54) |
| (3,728) |  |  | (4,605) |
Valuation allowance | (864) |  |  | (11,412) |
Net long term deferred tax asset | $ | 7,800 |  |  | $ | 399 |
In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all of its deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations (including cumulative income (losses) in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. During fiscal 2022, the Company incurred operating losses, and when combined with operating results from fiscal 2021 and 2020, the Company incurred a cumulative operating loss for the last three years. As a result, the Company identified objective and verifiable negative evidence in the form of cumulative losses in the U.S. and in certain state jurisdictions over the preceding twelve quarters ended January 31, 2022. While the Company had taken significant measures to return to profitability, and order rates at the beginning of the year are favorable, the short-term outlook for the school furniture market is challenging, particularly relating to ongoing supply chain difficulties. During the fourth quarter of the year ended January 31, 2022, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets no longer met the more-likely-than-not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets. At January 31, 2022, the Company recorded a valuation allowance of $11.4 million against its net deferred tax assets. At January 31, 2022, the Company has NOL of approximately $12.5 million for U.S. federal tax purposes, with no expirations, and $31.2 million for state income tax purposes, expiring at various dates through January 31, 2041. During the fiscal year ended January 31, 2023, the Company was profitable and returned to a cumulative 3-year profit in the fourth quarter. The Company benefited from continued growth in order rates, growth in sales volume, and improvements in gross margin. The Company utilized a material portion of its federal and certain state net operating loss carryforwards (“NOL”) in fiscal 2023 and anticipates that all federal NOL may be utilized by the end of fiscal 2024. During the fourth quarter of the year ended January 31, 2023, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets met the more-likely-than-not criteria and reversed a majority of its valuation allowances against its net deferred tax assets. At January 31, 2023, the Company recorded a partial valuation allowances of $0.9 million on certain state NOL to reduce the carrying amount of deferred tax assets to an amount that is more-likely-than-not to be realized. The net change in the valuation allowance for the year ended January 31, 2023, was a decrease of $10.5 million. At January 31, 2023, the Company has NOL of approximately $2.7 million for U.S. federal tax purposes, with no expirations, and $25.1 million for state income tax purposes, expiring at various dates through January 31, 2041. The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended January 31, respectively, as follows (in thousands):
| 2023 |  | 2022
Balances as of February 1, | $ | 57 |  |  | $ | 54 |
Increases related to prior year tax positions | — |  |  | — |
Decreases related to prior year tax positions | (5) |  |  | (1) |
Increases related to current year tax positions | 19 |  |  | 10 |
Decreases related to lapsing of statute of limitations | (9) |  |  | (6) |
Balance as of January 31, | $ | 62 |  |  | $ | 57 |
At January 31, 2023, the Company’s unrecognized tax benefits associated with uncertain tax positions were $62,000, of which $49,000 if recognized, would favorably affect the effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense which is consistent with the recognition of the items in prior reporting. The Company had recorded a liability for interest and penalties related to unrecognized tax benefits of $16,000 at January 31, 2023, and $13,000 at January 31, 2022. The year ended January 31, 2018 and subsequent years remain open for examination by the IRS and state tax authorities. The Company is not currently under IRS or state examination. The specific timing of when the resolution of each tax position will be reached is uncertain. As of January 31, 2023, it is reasonably possible that unrecognized tax benefits will decrease by $11,000 within the next 12 months due to the expiration of the statute of limitations.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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