Income Taxes

6 Months Ended

Jan. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recognized an income tax expense of $4.2 million and an income tax benefit of $1.9 million for the three months ended January 31, 2020 and 2019, respectively, and an income tax benefit of $2.4 million and $4.6 million for the six months ended January 31, 2020 and 2019, respectively. The change in the amount of income tax recorded for each of the three and six months ended January 31, 2020 compared to the same periods a year ago was primarily due to the base erosion and anti-abuse tax ("BEAT") liability of $10.4 million recognized in the quarter ended January 31, 2020, of which $4.2 million relates to the current fiscal year and $6.2 million relates to the prior fiscal year, as a result of regulations issued by the Internal Revenue Service (“IRS”) on December 2, 2019. The effective tax rate of (27)% and 7% for the three and six months ended January 31, 2020, respectively, differs from the statutory U.S. federal income tax rate of 21% mainly due to permanent differences for stock-based compensation, including excess tax benefits, research and development credits, certain non-deductible expenses including executive compensation, and BEAT.

During the three and six months ended January 31, 2020, unrecognized tax benefits increased by $0.3 million and $0.7 million, respectively. As of January 31, 2020, the Company had unrecognized tax benefits of $6.8 million that, if recognized, would affect the Company’s effective tax rate.

In February 2020, the California Franchise Tax Board notified the Company that they will be reviewing fiscal year 2017 and 2018 state income tax returns.