Income Tax

6 Months Ended

Jul. 31, 2022

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

 Autodesk had income tax expense of $46 million, relative to pre-tax income of $232 million for the three months ended July 31, 2022, and income tax expense of $24 million, relative to pre-tax income of $139 million for the three months ended July 31, 2021. Income tax expense for the three months ended July 31, 2022, reflects an increase in tax expense relating to stock-based compensation and final U.S. foreign tax credit regulations enacted in fiscal 2023, offset by a U.S. foreign derived intangible income benefit driven by the capitalization of research and development expenditures starting in fiscal 2023 as required by the U.S. Tax Cuts and Jobs Act (“Tax Act”).

 Autodesk had income tax expense of $95 million, relative to pre-tax income of $427 million for the six months ended July 31, 2022, and income tax benefit of $1 million, relative to pre-tax income of $270 million for the six months ended July 31, 2021. Income tax expense for the six months ended July 31, 2022, reflects an increase in tax expense relating to stock-based compensation and final U.S. foreign tax credit regulations enacted in fiscal 2023, offset by a U.S. foreign derived intangible income benefit driven by the capitalization of research and development expenditures starting in fiscal 2023 as required by the Tax Act. In addition, fiscal 2022 included a non-recurring discrete tax benefit relating to the Supreme Court decision in India on the taxability of software license payments to nonresidents.

Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. We have maintained a valuation allowance on our Netherlands, Canada, Australia, California, Michigan deferred tax assets, as well as our U.S. capital loss deferred tax assets as it is more likely than not that some or all of the deferred tax assets will not be realized.

As of July 31, 2022, the Company had $207 million of gross unrecognized tax benefits, of which $34 million would reduce our valuation allowance, if recognized. The remaining $173 million would impact the effective tax rate, if recognized. The company’s unrecognized tax benefits decreased by $8 million in three months ended July 31, 2022, due to the settlement of a German tax audit for tax years 2014-2016.