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 currently 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 March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law. The CARES Act includes, among other items, modifications to net operating loss carryback periods, net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act allows a five-year carryback of net operating losses generated between 2018 and 2021 to fully offset certain taxable income previously subject to a 35% statutory tax rate. As a result of the CARES Act and changes to our methods of accounting for items under the Internal Revenue Code, we generated a loss for tax purposes on our calendar 2020 tax return, will carry back the loss to two of the five preceding tax years, and obtain a refund of previously paid federal income taxes. The net operating loss carryback has reduced our effective tax rate and income taxes payable and increased our unrecognized tax benefits, income tax refund receivables, and deferred tax liabilities. The net operating loss carryback will reopen our 2015 tax return to examination.

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,


Year ended April 30,	2021		2020		2019
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	1.8	%	20.4	%	2.3	%
Earnings taxed in foreign jurisdictions	(1.2)	%	619.4	%	(2.7)	%
Permanent differences	0.5	%	(257.5)	%	0.3	%
Impairment of goodwill	—	%	(832.5)	%	—	%
Uncertain tax positions	7.5	%	508.3	%	(2.3)	%
U.S. tax on income from foreign affiliates	1.0	%	(247.4)	%	—	%
Remeasurement of deferred tax assets and liabilities	(0.1)	%	117.6	%	0.2	%
Changes in prior year estimates	(0.5)	%	55.5	%	—	%
Federal income tax credits	(0.9)	%	216.3	%	—	%

Tax impacts of stock-based compensation vesting	—	%	44.8	%	—	%

Tax benefit due to NOL carryback under CARES Act	(17.5)	%	—	%	—	%
Tax deductible write-down of foreign investment	(1.7)	%	—	%	—	%

Change in valuation allowance - domestic	(0.2)	%	37.1	%	0.4	%
Change in valuation allowance - foreign	1.7	%	20.6	%	(0.8)	%

Other	0.3	%	(41.2)	%	(0.1)	%
Effective tax rate	11.7	%	282.4	%	18.3	%

Our effective tax rate for continuing operations was 11.7% and 282.4% for fiscal year 2021 and 2020, respectively. The decrease in the effective tax rate in 2021 compared to 2020 is primarily due to the near break-even loss in 2020 of $3.4 million, which caused an exaggerated impact for nearly all adjustments impacting the rate. Our 2021 effective tax rate is also lower because of net operating loss carrybacks generated during the year, partially offset by uncertain tax positions recorded in the current year.

The increase in the effective tax rate in fiscal year 2020 compared to fiscal year 2019 is also primarily due to the near break-even loss in 2020 of $3.4 million, which caused an exaggerated impact for nearly all adjustments impacting the rate. For 2020, the largest increases in the effective tax rate over 2019 are tax benefits from statute of limitations expiring on certain uncertain tax positions and the mix of earnings in foreign jurisdictions, offset by the adverse tax impacts associated with the nondeductible goodwill impairment to the Wave reporting unit. Due to the pretax loss in 2020, the tax benefits increased the effective tax rate while tax expense decreased the effective tax rate.


(in 000s)
Year ended April 30,	2021		2020		2019
Current:
Federal	$	58,834	$	18,048	$	74,993
State	12,000		(16,614)		12,345
Foreign	26,032		1,991		6,711
	96,866		3,425		94,049
Deferred:
Federal	2,493		1,703		6,625
State	(11,368)		(1,516)		(1,070)
Foreign	(9,467)		(13,142)		300
	(18,342)		(12,955)		5,855
Total income taxes (benefit) for continuing operations	$	78,524	$	(9,530)	$	99,904

The net loss from discontinued operations for fiscal years 2021, 2020 and 2019 totaled $6.4 million, $13.7 million and $22.7 million, respectively, and was net of tax benefits of $3.9 million, $4.1 million and $6.8 million, respectively.


(in 000s)
As of April 30,	2021		2020
Deferred tax assets:
Accrued expenses	$	3,576	$	4,646
Deferred revenue	10,445		11,082
Allowance for credit losses and related reserves	33,027		29,666


Deferred and stock-based compensation	24,712		6,669
Net operating loss carry-forward	104,013		86,213
Lease liabilities	112,249		126,505
Federal tax benefits related to state unrecognized tax benefits	16,682		16,729
Property and equipment	40,138		—
Intangibles - intellectual property	86,711		85,688
Valuation allowance	(55,401)		(45,124)
Total deferred tax assets	376,152		322,074

Deferred tax liabilities:
Prepaid expenses and other	(11,927)		(5,189)
Lease right of use assets	(109,726)		(123,900)
Property and equipment	—		(12,221)
Income tax method change	(56,257)		—
Intangibles	(72,650)		(64,252)
Total deferred tax liabilities	(250,560)		(205,562)

Net deferred tax assets	$	125,592	$	116,512


(in 000s)
Year ended April 30,	2021		2020		2019
Balance, beginning of the year	$	45,124	$	47,070	$	49,215

Additions charged to costs and expenses	13,492		2,151		2,302

Deductions	(3,215)		(4,097)		(4,447)
Balance, end of the year	$	55,401	$	45,124	$	47,070

Our valuation allowance on deferred tax assets has a net increase of $10.3 million during the current period. The gross increase in valuation allowance of $13.5 million is related to net operating loss deferred tax assets generated by foreign losses that we do not expect to utilize in future years. This $13.5 million increase is offset by a $3.2 million decrease to our valuation allowance balance for adjustments to certain state and foreign net operating losses we now expect to utilize in future periods.

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, 2021, we had net operating losses in various states and foreign jurisdictions. The amount of state and foreign net operating losses varies by taxing jurisdiction. We maintain a valuation allowance of $21.3 million on state net operating losses and $33.2 million on foreign net operating losses for the portion of such loses that, more likely than not, will not be realized. Of the $49.5 million of net operating loss deferred tax assets, $10.4 million will expire in varying amounts during fiscal years 2022 through 2041 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, 2021.


(in 000s)
Year ended April 30,	2021		2020		2019
Balance, beginning of the year	$	168,062	$	185,144	$	186,061
Additions based on tax positions related to prior years	121,364		1,501		9,937
Reductions based on tax positions related to prior years	(34,470)		(10,128)		(42,647)
Additions based on tax positions related to the current year	43,800		12,093		38,611
Reductions related to settlements with tax authorities	(29,362)		(980)		(2,025)
Expiration of statute of limitations	(4,584)		(19,568)		(4,793)


Balance, end of the year	$	264,810	$	168,062	$	185,144

The total gross unrecognized tax benefit ending balance as of April 30, 2021, 2020 and 2019, includes $214.9 million, $132.3 million and $122.5 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 deductible taxes. The current year additions in unrecognized tax benefits related to prior years are primarily related to net operating loss carryback allowed by the CARES Act. Reductions from prior year are primarily related to settlements with taxing authorities and expirations of statute of limitations.