Income Taxes

The provision for income taxes consists of the following:



	Fiscal year ended January 31,
	2015			2014			2013
Federal:
Current	$	(43.8	)	$	29.1		$	30.9
Deferred	(11.9		)	(41.4		)	(13.3		)
State:
Current	(13.2		)	0.6			7.8
Deferred	9.0			—			(18.6		)
Foreign:
Current	69.5			63.9			54.3
Deferred	(8.4		)	(1.1		)	1.5
	$	1.2		$	51.1		$	62.6

During fiscal year 2015, the Company reduced its current federal and state taxes payable by $0.5 million related to excess tax benefits from non-qualified stock options, offsetting additional paid-in capital. Pursuant to accounting standards related to stock-based compensation, the Company has unrecorded excess stock option tax benefits of $217.9 million as of January 31, 2015. These amounts will be credited to additional paid-in-capital when such amounts reduce cash taxes payable. Foreign pretax income was $302.5 million in fiscal 2015, $380.5 million in fiscal 2014, and $383.3 million in fiscal 2013.

The differences between the U.S. statutory rate and the aggregate income tax provision are as follows:



	Fiscal year ended January 31,
	2015			2014			2013
Income tax provision at U.S. Federal statutory rate	$	29.0		$	98.0		$	108.5
State income tax benefit, net of the U.S. Federal benefit	(4.0		)	(2.9		)	(1.7		)
Foreign income taxed at rates different from the U.S. statutory rate	(40.0		)	(57.1		)	(54.5		)
U.S. valuation allowance	2.9			2.1			1.7
Tax effect of non-deductible stock-based compensation	15.7			10.8			21.1
Research and development tax credit benefit	(7.2		)	(8.8		)	(7.0		)
Tax (benefit) expense from closure of income tax audits and changes in uncertain tax positions	(0.7		)	3.6			(2.8		)
Tax effect of officer compensation in excess of $1.0 million	2.4			3.0			1.8
U.S. Manufacturer's deduction	—			(0.1		)	(4.9		)
Other	3.1			2.5			0.4
	$	1.2		$	51.1		$	62.6

Significant components of Autodesk’s deferred tax assets and liabilities are as follows:



	January 31,
	2015			2014
Stock-based compensation	$	39.9		$	37.4
Research and development tax credit carryforwards	62.6			78.4
Foreign tax credit carryforwards	—			16.3
Accrued compensation and benefits	43.6			38.6
Other accruals not currently deductible for tax	18.4			14.5
Purchased technology and capitalized software	13.2			23.4
Fixed assets	16.2			17.5
Tax loss carryforwards	16.0			12.6
Deferred Revenue	48.0			33.1
Other	7.4			5.1
Total deferred tax assets	265.3			276.9
Less: valuation allowance	(70.8		)	(67.2		)
Net deferred tax assets	194.5			209.7
Unremitted earnings of foreign subsidiaries	(9.4		)	(21.8		)
Total deferred tax liability	(9.4		)	(21.8		)
Net deferred tax assets	$	185.1		$	187.9

Effective February 1, 2014, Autodesk prospectively adopted FASB's Accounting Standards Update (“ASU”) 2013-11

regarding ASC Topic 740 “Income Tax.” This ASU clarifies the guidance on the presentation of an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the consolidated financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. Research and development tax credit carryforwards and foreign tax credit carryforwards as of January 31, 2015 have been reduced by unrecognized tax benefits to the extent the tax credit carryforwards would be expected to offset tax liabilities in the event the uncertain tax positions are disallowed.

The valuation allowance increased by $3.6 million, $15.9 million, and $3.8 million in fiscal 2015, 2014, and 2013, respectively. The fiscal 2015, 2014, and 2013 changes in valuation allowance were primarily related to U.S. and Canadian deferred taxes.

Autodesk provides U.S. income taxes on the earnings of foreign subsidiaries, except to the extent subsidiaries' earnings are considered permanently reinvested outside the U.S. As of January 31, 2015, the cumulative amount of earnings upon which U.S. income taxes have not been provided was $1,809.4 million. The unrecognized deferred tax liability for these earnings was approximately $514.4 million.

Realization of the net deferred tax assets of $185.1 million is dependent upon the company's ability to generate future taxable income in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced and Autodesk then determines that it is not more likely than not to realize such deferred tax assets.

As of January 31, 2015, Autodesk had $21.7 million of cumulative federal tax loss carryforwards and $354.3 million of cumulative state tax loss carryforwards, which may be available to reduce future income tax liabilities in certain jurisdictions. These federal and state tax loss carryforwards will expire beginning fiscal 2015 through fiscal 2034 and fiscal 2015 through fiscal 2034, respectively. Autodesk also had $7.4 million of cumulative UK tax loss carryforwards, which may be available to reduce future income tax liabilities indefinitely. Autodesk had $9.2 million of cumulative federal and state capital loss carryforwards as of January 31, 2015 which are available to offset future capital gains through fiscal 2018.

As of January 31, 2015, Autodesk had $104.7 million of cumulative federal research tax credit carryforwards, $54.8 million of cumulative California state research tax credit carryforwards, and $59.8 million of cumulative Canadian federal tax credit carryforwards, which may be available to reduce future income tax liabilities in the respective jurisdictions. The federal credit carryforwards will expire beginning fiscal 2020 through fiscal 2035, the state credit carryforwards may reduce future California income tax liabilities indefinitely, and the Canadian tax credit carryforwards will expire beginning fiscal 2024 through fiscal 2034. Autodesk also has $163.6 million of cumulative foreign tax credit carryforwards, which may be available to reduce future U. S. tax liabilities. The foreign tax credit will expire beginning fiscal 2019 through fiscal 2026.

Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code and similar state provisions. This annual limitation may result in the expiration of net operating losses and credits before utilization.

As a result of certain business and employment actions and capital investments undertaken by Autodesk, income earned in certain Europe and Asia Pacific countries is subject to reduced tax rates through fiscal 2016 and 2020, respectively with extensions available with incremental business and employment actions. The net income tax benefits attributable to the tax status of these business arrangements are estimated to be $1.2 million ($0.01 basic net income per share) in fiscal 2015, $9.7 million ($0.04 basic net income per share) in fiscal 2014, and $6.6 million ($0.03 basic net income per share) in fiscal 2013. The income tax benefits were offset partially by accruals of U.S. income taxes on undistributed earnings, among other factors.

As of January 31, 2015, the company had $245.8 million of gross unrecognized tax benefits, of which $227.3 million would impact the effective tax rate, if recognized. It is possible that the amount of unrecognized tax benefits will change in the next twelve months; however an estimate of the range of the possible change cannot be made at this time.

A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits is as follows:



	Fiscal Year Ended January 31,
	2015			2014			2013
Gross unrecognized tax benefits at the beginning of the fiscal year	$	222.1		$	212.7		$	201.1
Increases for tax positions of prior years	3.2			1.8			0.4
Decreases for tax positions of prior years	(2.5		)	(0.3		)	(0.4		)
Increases for tax positions related to the current year	33.2			15.3			17.8
Decreases relating to settlements with taxing authorities	(5.4		)	(4.6		)	(3.0		)
Reductions as a result of lapse of the statute of limitations	(4.8		)	(2.8		)	(3.2		)
Gross unrecognized tax benefits at the end of the fiscal year	$	245.8		$	222.1		$	212.7

It is the company's continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. Autodesk had $2.0 million, $2.8 million, and $1.9 million, net of tax benefit, accrued for interest and an immaterial amount accrued for penalties related to unrecognized tax benefits as of January 31, 2015, 2014, and 2013, respectively.

Autodesk and its subsidiaries are subject to income tax in the United States as well as numerous state and foreign jurisdictions. Autodesk's U.S. and state income tax returns for fiscal year 2003 through fiscal year 2015 remain open to examination. In addition, Autodesk files tax returns in multiple foreign taxing jurisdictions with open tax years ranging from fiscal year 2003 to 2015.