Income Taxes

12 Months Ended

Jul. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is subject to taxation in U.S. federal, state and local jurisdictions and various non-U.S. jurisdictions, including Australia, Canada, the Netherlands and Switzerland. The Company’s effective tax rate is impacted by the tax laws, regulations, practices and interpretations in the jurisdictions in which it operates and may fluctuate significantly from period to period depending on, among other things, the geographic mix of the Company’s profits and losses, changes in tax laws and regulations or their application and interpretation, the outcome of tax audits and changes in valuation allowances associated with the Company’s deferred tax assets.

U.S. and foreign components of income before provision for income taxes are as follows (in thousands):

	Year Ended July 31,
	2023		2022		2021
U.S.	$	217,971	$	387,729	$	148,898
Foreign	155,546		69,432		(23,715)
Income before income taxes	$	373,517	$	457,161	$	125,183

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax liabilities and assets are as follows (in thousands):

	July 31,
	2023		2022
Deferred income tax liabilities:
Fixed assets	$	211,995	$	203,669
Intangible assets	143,402		119,066
Operating lease right of use assets	45,913		44,873
Convertible debt	—		18,780
Other	22,115		18,157
Total	423,425		404,545
Deferred income tax assets:
Canyons obligation	18,631		17,291
Stock-based compensation	9,370		9,957
Investment in Partnerships	10,430		10,602
Deferred compensation and other accrued benefits	11,099		15,202
Contingent Consideration	18,423		10,719
Net operating loss carryforwards and other tax credits	14,864		8,516
Operating lease liabilities	48,953		49,530
Other, net	28,988		24,501
Total	160,758		146,318
Valuation allowance for deferred income taxes	(9,603)		(5,188)
Deferred income tax assets, net of valuation allowance	151,155		141,130
Net deferred income tax liability	$	272,270	$	263,415

The components of deferred income taxes recognized in the accompanying Consolidated Balance Sheets are as follows (in thousands):

	July 31,
	2023		2022
Deferred income tax asset	$	3,867	$	5,049
Deferred income tax liability	276,137		268,464
Net deferred income tax liability	$	272,270	$	263,415

Significant components of the provision for income taxes are as follows (in thousands):

	Year Ended July 31,
	2023		2022		2021
Current:
Federal	$	17,473	$	62,974	$	20,387
State	6,759		13,938		4,935
Foreign	40,117		21,302		(8,460)
Total current	64,349		98,214		16,862
Deferred:
Federal	23,813		(6,910)		(16,289)
State	1,372		1,966		(2,423)
Foreign	(1,120)		(4,446)		2,576
Total deferred	24,065		(9,390)		(16,136)
Provision for income taxes	$	88,414	$	88,824	$	726

A reconciliation of the income tax provision for continuing operations and the amount computed by applying the United States federal statutory income tax rate to income before income taxes is as follows:

	Year Ended July 31,
	2023		2022		2021
At U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State income tax, net of federal benefit	2.2	%	3.8	%	4.2	%
Change in uncertain tax positions	(1.5)	%	(1.2)	%	(3.5)	%
Stock-based compensation	0.7	%	(3.6)	%	(14.3)	%
Noncontrolling interests	(1.0)	%	(1.2)	%	0.8	%
Foreign taxes	3.2	%	0.1	%	(5.0)	%
Taxes related to prior year filings	(0.1)	%	0.3	%	(2.9)	%
Other	(0.8)	%	0.2	%	0.3	%
Effective tax rate	23.7	%	19.4	%	0.6	%

A reconciliation of the beginning and ending amount of unrecognized tax benefits associated with uncertain tax positions, excluding associated deferred tax benefits and accrued interest and penalties, if applicable, is as follows (in thousands):

	Year Ended July 31,
	2023		2022		2021
Balance, beginning of year	$	62,909	$	67,857	$	70,299
Additions for tax positions of prior years	11,025		11,179		16,754
Lapse of statute of limitations	(22,254)		(16,127)		(19,196)
Balance, end of year	$	51,680	$	62,909	$	67,857

As of July 31, 2023, the Company’s unrecognized tax benefits associated with uncertain tax positions relate to the treatment of the Talisker lease payments as payments of debt obligations and that the tax basis in Canyons goodwill is deductible, and are included within other long-term liabilities in the accompanying Consolidated Balance Sheets.

As of July 31, 2023, the Company had recorded $51.7 million of uncertain tax positions as well as $5.1 million of accrued interest and penalties. During the year ended July 31, 2023, the Company experienced a reduction in the uncertain tax positions due to the lapse of the statute of limitations of $22.3 million, which was partially offset with an increase to the uncertain tax position of $11.0 million. The Company also recognized a tax benefit of $0.7 million from a reduction in accrued interest and penalties during the year ended July 31, 2023. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. Additionally, the Company expects a reduction to its uncertain tax positions for the fiscal year ending July 31, 2024, due to the lapse of the statute of limitations.

The Company’s major tax jurisdictions in which it files income tax returns are the U.S. federal jurisdiction, various state jurisdictions, Australia, Canada and Switzerland. The Company’s U.S. federal and state income tax returns are generally subject to tax examinations for the tax years 2019 through the current period. The Company’s Australian and Canadian income tax returns are generally subject to examination for the tax years 2018 through the current period, and Swiss income tax returns are generally subject to examination for the tax years 2017 through the current period. Additionally, to the extent the Company has NOLs that have been carried back or are available for carryforward, the tax years to which the NOL was carried back or in which the NOL was generated may still be adjusted by the taxing authorities to the extent the NOLs are utilized.

The Company has NOL carryforwards totaling $63.4 million, primarily comprised of $10.6 million of federal and state NOLs as a result of the acquisition of Peak Resorts in September 2019 that will expire beginning July 31, 2034 and non-U.S. NOLs of $52.8 million (for which a portion will begin expiring July 31, 2024, and a portion will carry forward indefinitely). In connection with Peak Resorts’ initial public offering in November 2014, as well as the Company’s acquisition of Peak Resorts in September 2019, Peak Resorts had two ownership changes pursuant to the provisions of the Tax Reform Act of 1986. As a result, the Company’s usage of its eligible Federal NOL carryforwards will be limited each year by these ownership changes; however, management believes the full benefit of those carryforwards will be realized prior to their respective expiration dates. As of July 31, 2023, the Company has recorded a valuation allowance of $4.4 million on the historical non-U.S. NOL carryforwards, as the Company has determined that it is more likely than not that the associated NOL carryforwards will not be realized. The Company has foreign tax credit carryforwards of $4.2 million, which expire by the year ending July 31, 2028. As of July 31, 2023, the Company has recorded a valuation allowance of $4.2 million on foreign tax credit carryforwards, as the Company has determined that it is more likely than not that these foreign tax credit carryforwards will not be realized. Additionally, the Company has $1.0 million of foreign deferred tax assets, for which a valuation allowance of $1.0 million has been recorded.

The Company may be required to record additional valuation allowances if, among other things, adverse economic conditions negatively impact the Company’s ability to realize its deferred tax assets. Evaluating and estimating the Company’s tax provision, current and deferred tax assets and liabilities and other tax accruals requires significant management judgment. The Company intends to indefinitely reinvest undistributed earnings, if any, in its Canadian foreign subsidiaries. It is not practical at this time to determine the income tax liability related to any remaining undistributed earnings.