We file a consolidated federal income tax return in the U.S. with the IRS and file tax returns in various state, local, and foreign jurisdictions. Tax returns are typically examined and either settled upon completion of the examination or through the appeals process. Our U.S. federal income tax returns for 2017 and later years remain open for examination. Our U.S. federal income tax returns for 2016 and all prior periods are closed. With respect to state and local jurisdictions and countries outside of the U.S., we are typically subject to examination for three to six years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest, and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to federal, state, local or foreign audits.

On December 22, 2017, the U.S. government enacted legislation commonly referred to as the Tax Cuts and Jobs Act (Tax Legislation), which made broad and complex changes to the U.S. tax code that impacted our financial statements, the most significant being a reduction in the U.S. federal corporate income tax rate from 35% to 21% and the imposition of a one-time transition tax on certain earnings of foreign subsidiaries. In addition, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin 118 (SAB 118), which provided guidance on accounting for the tax effects of Tax Legislation. SAB 118 provided a measurement period that should not extend beyond one year from the Tax Legislation’s enactment date for companies to complete their analysis and apply the provisions of Tax Legislation to their financial statements. We completed our analysis of the Tax Legislation in fiscal 2019.

More recently, both the United States and Canada implemented emergency economic relief programs as a way of minimizing the economic impact of the global COVID-19 pandemic during our fourth fiscal quarter. In the U.S., the Coronavirus Aid, Relief, and Economic Security (CARES) Act includes, among other items, provisions relating to refundable payroll tax credits, deferment of certain tax payments, modifications to the net interest deduction limitations and net operating loss carrybacks, and technical corrections to tax depreciation methods for qualified improvement property (QIP). As of April 24, 2020, we have elected to defer the employer-paid portion of social security taxes. Additionally, as a result of the technical amendments made by the CARES Act to QIP, we are presently estimating the acceleration of tax depreciation expenses of $8.5 million. Canada’s COVID-19 legislation, includes, among other items, a Canada Emergency Wage Subsidy (CEWS). We continue to evaluate the impacts the CARES Act, CEWS, and other global COVID-19 relief legislation could have on our operating results, cash flows and financial condition. Further, we will record the associated tax impacts in future periods as they occur, generally when guidance is finalized, new information is obtained, the Company is able to estimate an impact, or when we realize any non-income tax benefits.

We operate in multiple income tax jurisdictions both within the United States and internationally. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on transfer pricing analyses of comparable companies and predictions of future economic conditions. Although these intercompany transactions reflect arm’s length terms and the proper transfer pricing documentation is in place, transfer pricing terms and conditions may be scrutinized by local tax authorities during an audit and any resulting changes may impact our mix of earnings in countries with differing statutory tax rates.



Year ended April 30,	2020		2019		2018
U.S. statutory tax rate	21.0	%	21.0	%	21.0	%
Change in tax rate resulting from:
State income taxes, net of federal income tax benefit	20.4	%	2.3	%	2.2	%
Earnings taxed in foreign jurisdictions	619.4	%	(2.7	)%	(4.9	)%
Permanent differences	(257.5	)%	0.3	%	0.4	%
Impairment of Goodwill	(832.5	)%	—	%	—	%
Uncertain tax positions	508.3	%	(2.3	)%	3.6	%
U.S. tax on income from foreign affiliates	(247.4	)%	—	%	—	%
Remeasurement of deferred tax assets and liabilities	117.6	%	0.2	%	(2.6	)%
Changes in prior year estimates	55.5	%	—	%	—	%
Federal income tax credits	216.3	%	—	%	—	%
Tax impacts of stock-based compensation vesting	44.8	%	—	%	—	%
Tax benefit due to effective date of statutory rate change	—	%	—	%	(15.9	)%
Change in valuation allowance - domestic	37.1	%	0.4	%	1.1	%
Change in valuation allowance - foreign	20.6	%	(0.8	)%	2.9	%
Other	(41.2	)%	(0.1	)%	(1.5	)%
Effective tax rate	282.4	%	18.3	%	6.3	%

During fiscal year 2020, we recorded a goodwill impairment related to our Wave reporting unit of $106.0 million. We have made the tax accounting policy election to first allocate the impairment to our nondeductible goodwill based on each legal entity's pre-impairment nondeductible goodwill balance.

Our effective tax rate for continuing operations was 282.4% and 18.3% for 2020 and 2019, respectively. The increase in the effective tax rate in 2020 compared to 2019 is primarily due to the near break-even loss in the current year of $3.4 million, which causes an exaggerated rate impact for nearly all adjustments. The largest increases in the effective tax rate over prior year are tax benefits from statute of limitations expiring on certain uncertain tax positions and the mix of earnings in foreign jurisdictions, partially offset by the adverse tax impacts associated with the nondeductible goodwill impairment to the Wave reporting unit. For fiscal year 2020, tax benefits increase the effective tax rate while tax expense decreases the effective tax rate.

The increase in the effective tax rate in 2019 compared to 2018 is due to the impact of the reduction in the U.S. corporate income tax rate from 35% to 21% in fiscal year 2018. The effects of the rate change were exaggerated in fiscal year 2018 due to the seasonality of our business and differing year ends for corporate income tax filing and financial reporting purposes.



(in 000s)
Year ended April 30,	2020			2019			2018
Current:
Federal	$	18,048		$	74,993		$	(53,630	)
State	(16,614		)	12,345			25,240
Foreign	1,991			6,711			9,953
	3,425			94,049			(18,437		)
Deferred:
Federal	1,703			6,625			50,505
State	(1,516		)	(1,070		)	24,666
Foreign	(13,142		)	300			(14,911		)
	(12,955		)	5,855			60,260
Total income tax expense (benefit)	$	(9,530	)	$	99,904		$	41,823



(in 000s)
As of April 30,	2020			2019
Deferred tax assets:
Accrued expenses	$	4,646		$	4,479
Deferred revenue	11,082			9,603
Allowance for credit losses and related reserves	29,666			25,849
Internally-developed software	—			4,588
Deferred and stock-based compensation	6,669			5,970
Net operating loss carry-forward	86,213			72,618
Lease liabilities	126,505			—
Federal tax benefits related to state unrecognized tax benefits	16,729			20,141
Intangibles - intellectual property	85,688			93,300
Valuation allowance	(45,124		)	(47,070		)
Total deferred tax assets	322,074			189,478

Deferred tax liabilities:
Prepaid expenses and other	(5,189		)	(8,592		)
Lease right of use asset	(123,900		)	—
Property and equipment	(12,221		)	(9,726		)
Intangibles	(64,252		)	(59,477		)
Total deferred tax liabilities	(205,562		)	(77,795		)

Net deferred tax assets	$	116,512		$	111,683



(in 000s)
Year ended April 30,	2020			2019			2018
Balance, beginning of the year	$	47,070		$	49,215		$	22,844
Additions:
Charged to costs and expenses	2,151			2,302			26,371
Charged to other accounts	—			—			—
Deductions	(4,097		)	(4,447		)	—
Balance, end of the year	$	45,124		$	47,070		$	49,215

Our valuation allowance on deferred tax assets has a net decrease of $1.9 million during the current period. The gross decrease in valuation allowance of $4.1 million is due to the ability to utilize NOLs in future periods we were previously unable to utilize. The decrease is offset by a $2.2 million increase to valuation allowance for NOL DTAs related to current year foreign losses that are not expected to be utilized in future years.

Certain of our subsidiaries file stand-alone returns in various state, local and foreign jurisdictions, and others join in filing consolidated or combined returns in such jurisdictions. As of April 30, 2020, we had NOLs in various states and foreign jurisdictions. The amount of state and foreign NOLs vary by taxing jurisdiction. We maintain a valuation allowance of $22.8 million on state NOLs and $22.2 million on foreign NOLs for the portion of such losses that, more likely than not, will not be realized. Of the $45.0 million of net NOL DTAs, $5.9 million will expire in varying amounts during fiscal years 2021 through 2040 and the remaining $39.1 million has no expiration.

We do not currently intend to repatriate non-borrowed funds held by our foreign subsidiaries in a manner that would trigger a material tax liability; therefore, no provision has been made for income taxes that might be payable upon remittance of such earnings. The amount of unrecognized tax liability on these foreign earnings, net of expected foreign tax credits, is immaterial as of April 30, 2020.



(in 000s)
Year ended April 30,	2020			2019			2018
Balance, beginning of the year	$	185,144		$	186,061		$	149,943
Additions based on tax positions related to prior years	1,501			9,937			6,657
Reductions based on tax positions related to prior years	(10,128		)	(42,647		)	(25,259		)
Additions based on tax positions related to the current year	12,093			38,611			68,292
Reductions related to settlements with tax authorities	(980		)	(2,025		)	(637		)
Expiration of statute of limitations	(19,568		)	(4,793		)	(12,936		)
Other	—			—			1
Balance, end of the year	$	168,062		$	185,144		$	186,061

The total gross unrecognized tax benefit ending balance as of April 30, 2020, 2019 and 2018, includes $132.3 million, $122.5 million and $132.4 million, respectively, which if recognized, would impact our effective tax rate. The difference results from adjusting the gross balances for such items as federal, state and foreign deferred items, interest and

We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease by approximately $12.2 million within the next twelve months. The anticipated decrease is due to the expiration of statutes of limitations, anticipated closure of various tax matters currently under examination, and settlements with tax authorities. For such matters where a change in the balance of unrecognized tax benefits is not yet deemed reasonably possible, no estimate has been included.