Income Taxes

12 Months Ended

Jan. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before income taxes by U.S. and foreign jurisdictions were as follows for the periods shown (in thousands):

	Fiscal year ended January 31,
	2022		2021		2020
United States	$	487,962	$	378,042	$	305,339
Foreign	24,349		15,951		8,358
Total	$	512,311	$	393,993	$	313,697

The majority of our revenues from international sales are invoiced from and collected by our U.S. entity and recognized as a component of income before taxes in the United States as opposed to a foreign jurisdiction.

Provision for income taxes consisted of the following for the periods shown (in thousands):

	Fiscal year ended January 31,
	2022		2021		2020
Current provision:
Federal	$	53,426	$	7,108	$	11,143
State	12,580		4,763		4,695
Foreign	7,837		2,825		3,404
Total current provision	73,843		14,696		19,242
Deferred provision:
Federal	1,870		(816)		(1,063)
State	945		681		(517)
Foreign	8,264		(566)		(5,083)
Total deferred provision	11,079		(701)		(6,663)
Provision for income taxes	$	84,921	$	13,995	$	12,579

Provision for income taxes differed from the amount computed by applying the federal statutory income tax rate of 21% for each of the fiscal years ended January 31, 2022, 2021, and 2020 to income before income taxes as a result of the following for the periods shown (in thousands):

	Fiscal year ended January 31,
	2022		2021		2020
Federal tax statutory tax rate	$	107,585	$	82,739	$	65,876
State taxes	11,035		4,401		3,035
Tax credits	(25,968)		(24,617)		(23,468)
Stock-based compensation	(29,715)		(54,488)		(34,569)
Valuation allowance	19,402		10,269		7,408
Foreign derived intangible income deduction (FDII)	(3,406)		(5,134)		(4,836)
Other(1)	5,988		825		(867)
Provision for income taxes	$	84,921	$	13,995	$	12,579
(1) Prior period balances were adjusted to conform with current period presentation.

The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and liabilities related to the following (in thousands):

	January 31,
	2022		2021
Deferred tax assets:
Accruals and reserves	$	7,068	$	13,494
Capitalized expenditures	10,477		—
Stock-based compensation	16,615		11,486
Net operating loss carryforward	21,850		29,318
Tax credit carryforward	34,725		29,624
Lease liabilities	13,813		15,932
Other(1)	2,955		977
Gross deferred tax assets	107,503		100,831
Valuation allowance	(48,484)		(31,318)
Total deferred tax assets	59,019		69,513
Deferred tax liabilities:
Intangible assets	(31,200)		(30,253)
Lease right-of-use assets	(12,497)		(14,438)
Deferred costs(1)	(10,552)		(11,481)
Other(1)	(1,889)		(1,076)
Total deferred tax liabilities	(56,138)		(57,248)
Net deferred tax assets	$	2,881	$	12,265
(1) Prior period balances were adjusted to conform with current period presentation.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance at the end of January 31, 2022 was primarily related to certain foreign and U.S. state deferred tax assets.

As of January 31, 2022, the net operating loss carryforwards for federal, state, and foreign income tax purposes were approximately $48 million, $69 million, and $31 million, respectively. The federal net operating losses do not expire, while the state and foreign net operating losses begin to expire in 2031 and 2026, respectively.

As of January 31, 2022, we had $54 million of California research and development tax credits available to offset future taxes which do not expire.

We evaluate tax positions for recognition using a more likely than not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. We classify unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as “other non-current liabilities” in the consolidated balance sheets. As of January 31, 2022, the total amount of gross

unrecognized tax benefits was $25 million, of which $14 million, if recognized, would favorably impact our effective tax rate. The aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows for the periods shown (in thousands):

	Fiscal year ended January 31,
	2022		2021		2020
Beginning balance	$	18,628	$	14,515	$	12,597
Increases related to tax positions taken during the prior period	3,218		96		796
Increases related to tax positions taken during the current period	4,122		4,126		3,420
Decreases related to tax positions taken during the prior period	—		(51)		(128)
Audit settlements	(195)		—		—
Lapse of statute of limitations	(532)		(58)		(2,170)
Ending balance	$	25,241	$	18,628	$	14,515

Our policy is to classify interest and penalties associated with unrecognized tax benefits as a component of the provision for income taxes. Interest and penalties were not significant during fiscal year ended January 31, 2022.

We file tax returns in the United States for federal, California, and other states. Fiscal years ended January 31, 2017 and forward remain open to examination for federal income tax, and fiscal years ended January 31, 2018 and forward remain open to examination for California and other states. We file tax returns in multiple foreign jurisdictions. The fiscal years ended January 31, 2017 and forward remain open to examination in these foreign jurisdictions.