Income Taxes

12 Months Ended

Jan. 31, 2023

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,
	2023		2022		2021
United States	$	482,885	$	487,962	$	378,042
Foreign	26,211		24,349		15,951
Total	$	509,096	$	512,311	$	393,993

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,
	2023		2022		2021
Current provision:
Federal	$	110,610	$	53,426	$	7,108
State	29,775		12,580		4,763
Foreign	8,507		7,837		2,825
Total current provision	148,892		73,843		14,696
Deferred (benefit) provision:
Federal	(98,923)		1,870		(816)
State	(20,755)		945		681
Foreign	(7,824)		8,264		(566)
Total deferred (benefit) provision	(127,502)		11,079		(701)
Provision for income taxes	$	21,390	$	84,921	$	13,995

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, 2023, 2022, and 2021 to income before income taxes as a result of the following for the periods shown (in thousands):

	Fiscal year ended January 31,
	2023		2022		2021
Federal tax statutory tax rate	$	106,910	$	107,585	$	82,739
State taxes	7,318		11,035		4,401
Tax credits	(33,463)		(25,968)		(24,617)
Stock-based compensation	(52,304)		(29,715)		(54,488)
Valuation allowance	5,654		19,402		10,269
Foreign derived intangible income deduction (FDII)	(15,811)		(3,406)		(5,134)
Other	3,086		5,988		825
Provision for income taxes	$	21,390	$	84,921	$	13,995

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,
	2023		2022
Deferred tax assets:
Accruals and reserves	$	13,137	$	7,068
Capitalized expenditures	123,746		10,477
Stock-based compensation	32,536		16,615
Net operating loss carryforward	12,245		21,850
Tax credit carryforward	43,732		34,725
Lease liabilities	15,724		13,813
Other	7,890		2,955
Gross deferred tax assets	249,010		107,503
Valuation allowance	(51,685)		(48,484)
Total deferred tax assets	197,325		59,019
Deferred tax liabilities:
Intangible assets	(28,799)		(31,200)
Lease right-of-use assets	(14,192)		(12,497)
Deferred costs	(12,949)		(10,552)
Other	(6,180)		(1,889)
Total deferred tax liabilities	(62,120)		(56,138)
Net deferred tax assets	$	135,205	$	2,881

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. We maintain a full valuation allowance against certain foreign and net California deferred tax assets as it is not more likely than not that we will recognize the future benefits of these deferred tax assets.

As of January 31, 2023, the net operating loss carryforwards for federal, state, and foreign income tax purposes were approximately $15 million, $43 million, and $25 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, 2023, we had $66 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, 2023, the total amount of gross unrecognized tax benefits was $31 million, of which $18 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,
	2023		2022		2021
Beginning balance	$	25,241	$	18,628	$	14,515
Increases related to tax positions taken during the prior period	971		3,218		96
Increases related to tax positions taken during the current period	4,934		4,122		4,126
Decreases related to tax positions taken during the prior period	(137)		—		(51)
Audit settlements	—		(195)		—
Lapse of statute of limitations	(296)		(532)		(58)
Ending balance	$	30,713	$	25,241	$	18,628

Our policy is to classify interest and penalties associated with unrecognized tax benefits as a component of the provision for income taxes. Accrued interest and penalties included in our liability related to unrecognized tax benefits were $3 million, $2 million, and $1 million as of January 31, 2023, 2022, and 2021, respectively.

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, 2018 and forward remain open to examination in these foreign jurisdictions.