|12 Months Ended|
Jan. 31, 2021
|Income Tax Disclosure [Abstract]|
The Company files income tax returns in the U.S., various state jurisdictions, and various foreign jurisdictions. The Company is no longer subject to tax examinations by tax authorities for years prior to fiscal 2018.
The components of loss from operations before income taxes are as follows:
The components of the income tax provision from operations are as follows:
The income tax provision was computed using the federal statutory income tax rate and average state statutory rates, net of related federal benefits. The provision differs from our effective tax rate primarily due to the following:
The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act allowed us to accelerate the refund of our AMT credit from fiscal 2022 to fiscal 2021. The refund was received in late December 2020.
As a result of the 2017 Tax Reform Act, foreign earnings may now generally be repatriated back to the U.S. without incurring U.S. federal income tax. Historically, we have asserted our intention to indefinitely invest the cumulative undistributed earnings of our foreign subsidiaries except for Ireland. In response to increased cash requirements in the U.S. related to a significant decline in sales resulting from COVID-19 we declared two cash dividends in fiscal 2021 totaling $4.4 million.
The components of deferred income taxes are as follows:
At January 31, 2021, we had federal, state and foreign net operating loss carry forwards of $131.1 million, $77.4 million and $9.4 million respectively, which can be used to offset future tax liabilities and expire at various dates beginning in fiscal 2022. We perform a Section 382 analysis on a periodic basis and utilization of these net operating loss carry forwards may be limited pursuant to provisions of the respective local jurisdiction. In addition, at January 31, 2021, we had federal and state research and development credit carry forwards of $3.8 million and $1.8 million, respectively, and state investment tax credit carry forwards of $0.2 million. We have foreign tax credit carry forwards of $2.0 million, which are available to reduce future federal regular income taxes. These credits expire at various dates beginning in fiscal 2022, except for $0.2 million in credits that have an unlimited carryforward period.
We review the adequacy of the valuation allowance for deferred tax assets on a quarterly basis. We have evaluated the positive and negative evidence bearing upon our ability to realize our deferred tax assets and have established a valuation allowance of $43.4 million for such assets, which are comprised principally of net operating loss carry forwards, research and development credits, deferred revenue, and stock-based compensation. If we generate pre-tax income in the future, some portion or all of the valuation allowance could be reversed and a corresponding increase in net income would be reported in future periods. The valuation allowance increased by $5.2 million for the year ended January 31, 2021 and decreased by $3.7 million for the fiscal year ended January 31, 2020.
A reconciliation of the total amounts of gross unrecognized tax benefits is as follows:
As of January 31, 2021, we had $4.6 million of unrecognized tax benefits, a portion of which are classified as long term and included in long-term liabilities on our consolidated balance sheets. We recognized interest and penalties related to unrecognized tax benefits in the income tax provision on our consolidated statements of operations and comprehensive loss. As of January 31, 2021 and 2020, total gross interest accrued was $0.1 million. Included in the balance of unrecognized tax benefits as of January 31, 2021 and January 31, 2020 are $0.1 million for both periods of tax benefits that, if recognized, would affect the effective tax rate.
When accounting for uncertain tax positions, the impact of uncertain tax positions are recognized in the financial statements if they are more likely than not of being sustained upon examination, based on the technical merits of the position. The Company has determined that it has uncertain tax positions requiring recognition as of January 31, 2021 and no uncertain tax positions requiring recognition as of January 31, 2020. The Company does not expect any change to this determination in the next twelve months.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef