INCOME TAXES

3 Months Ended

Apr. 30, 2024

INCOME TAXES

INCOME TAXES

NOTE 11 – INCOME TAXES

The Company’s income tax amounts for the three months ended April 30, 2024 and 2023 differed from corresponding amounts computed by applying the federal corporate income tax rate of 21% to the income before income taxes for the periods as presented below:

	Three Months Ended April 30,
	2024		2023
Computed expected income tax expense	$	2,376	$	631
Difference resulting from:
Unrecognized tax loss benefit		794		—
Foreign tax rate differential		(216)		(198)
State income taxes, net of federal tax effect		418		84
Other permanent differences and adjustments, net		59		378
Income tax expense	$	3,431	$	895

Net Operating Loss (“NOL”) Carryback

As a result of the tax changes enacted by the Coronavirus, Aid, Relief and Economic Security Act signed into law in March 2020 (the “CARES Act”), the Company made a filing during the year ended January 31, 2021 with the Internal Revenue Service (the “IRS”) requesting carryback refunds of income taxes paid for the years ended January 31, 2016 (“Fiscal 2016”) and 2015 (“Fiscal 2015”) in the total amount of approximately $12.7 million. At the instruction of the IRS, the Company filed amended income tax returns for Fiscal 2016 and Fiscal 2015 during Fiscal 2024; the IRS has not completed the examination and approval process for the Company’s amended tax returns and refund request.

Research and Development Tax Credits

During the year ended January 31, 2023 (“Fiscal 2023”), the Company filed amended federal income tax returns for Fiscal 2022 and for the year ended January 31, 2021 (“Fiscal 2021”) that included research and development tax credits in the total amount of $5.8 million, which was netted with a provision for uncertain tax return positions in the amount of $2.4 million. In May 2023, the Company received notification that these amended federal income tax returns were selected for examination. At April 30, 2024, the examination was in its early stages of documentation requests and review.

Income Tax Refunds

As of April 30, 2024 and January 31, 2024, the balances of other current assets in the condensed consolidated balance sheet included income tax refunds receivable and prepaid income taxes in the total amounts of approximately $18.2 million and $18.3 million, respectively. The income tax refunds included the amount expected to be received from the IRS upon its examination and approval of the Company’s NOL carryback refund request and the completion of its examination of the amended tax returns for Fiscal 2022 and Fiscal 2021 as described above.

Income Tax Returns

The Company is subject to federal and state income taxes in the U.S., and income taxes in Ireland and the U.K. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations which require significant judgments to apply. The Company is no longer subject to income tax examinations by authorities for its fiscal years ended on or before January 31, 2020, except for several notable exceptions including Ireland, the U.K. and several states where the open periods are one year longer.

Solar Energy Projects

The Company holds equity investments in Solar Tax Credit (“STC”) investments. Primarily, the STC investments are structured as limited liability companies that invest in solar energy projects that are eligible to receive energy tax credits. During the three months ended April 30, 2024, the Company made investments of approximately $3.3 million in STC investments that were committed as of January 31, 2024. As of April 30, 2024, the Company had no remaining cash investment commitments related to its STC investments.

At April 30, 2024 and January 31, 2024, the investment accounts balances were $1.4 million and $2.1 million, respectively, which are included in other assets in the condensed consolidated balance sheets.

The Company has elected to use the proportional amortization method (“PAM”) for STC investments that qualify. Under PAM, an investment is amortized in proportion to the allocation of tax benefits received in each period, and the investment amortization and tax benefit amounts are presented net within income tax expense in the Company’s condensed consolidated statement of earnings. For the three months ended April 30, 2024, the Company recorded $0.7 million of investment amortization related to the STC investment that qualifies for PAM. The amount of non-income tax-related activity and other returns related to this investment was not material for the three months ended April 30, 2024. During the three months ended April 30, 2023, the Company did not have any STC investments that qualified for PAM.

For the Company’s STC investments that do not qualify for PAM, the Company accounts for the investments using the equity method of accounting and includes income and losses related to the investment in other income in the Company’s condensed consolidated statements of earnings. For the three months ended April 30, 2024 and 2023, the Company recorded its share of losses of less than $0.1 million and $0.1 million, respectively, from these STC investments.