INCOME TAXES

6 Months Ended

Jul. 31, 2024

INCOME TAXES

INCOME TAXES

NOTE 11 – INCOME TAXES

The Company’s income tax amounts for the six months ended July 31, 2024 and 2023 differed from corresponding amounts computed by applying the federal corporate income tax rate of 21% to the income before income taxes for the periods as presented below:

	Six Months Ended July 31,
	2024		2023
Computed expected income tax expense	$	7,475	$	4,276
Difference resulting from:
State income taxes, net of federal tax effect		1,186		455
Unrecognized tax loss benefit		961		529
Excess executive compensation		404		400
Stock-based compensation windfall		(531)		(126)
Foreign tax rate differential		(240)		(643)
GILTI		—		505
Tax credits		—		(453)
Other permanent differences and adjustments, net		259		544
Income tax expense	$	9,514	$	5,487

Net Operating Loss (“NOL”) Carryback

As a result of the tax changes enacted by the Coronavirus, Aid, Relief and Economic Security Act signed into law in March 2020 (the “CARES Act”), the Company made a filing during the year ended January 31, 2021 with the Internal Revenue Service (the “IRS”) requesting carryback refunds of income taxes paid for the years ended January 31, 2016 (“Fiscal 2016”) and 2015 (“Fiscal 2015”) in the total amount of approximately $12.7 million. At the instruction of the IRS, the Company filed amended income tax returns for Fiscal 2016 and Fiscal 2015 during Fiscal 2024; the IRS has not completed the examination and approval process for the Company’s amended tax returns and refund request.

Research and Development Tax Credits

During the year ended January 31, 2023 (“Fiscal 2023”), the Company filed amended federal income tax returns for Fiscal 2022 and for the year ended January 31, 2021 (“Fiscal 2021”) that included research and development tax credits in the total amount of $5.8 million, which was netted with a provision for uncertain tax return positions in the amount of $2.4 million. In May 2023, the Company received notification that these amended federal income tax returns were selected for examination. At July 31, 2024, the examination was in its early stages of documentation requests and review.

Income Tax Refunds

As of July 31, 2024 and January 31, 2024, the balances of other current assets in the condensed consolidated balance sheet included income tax refunds receivable and prepaid income taxes in the total amount of approximately $18.3 million. The income tax refunds included the amount expected to be received from the IRS upon its examination and approval of the

Company’s NOL carryback refund request and the completion of its examination of the amended tax returns for Fiscal 2022 and Fiscal 2021 as described above.

Income Tax Returns

The Company is subject to federal and state income taxes in the U.S., and income taxes in Ireland and the U.K. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations which require significant judgments to apply. The Company is no longer subject to income tax examinations by authorities for its fiscal years ended on or before January 31, 2020, except for several notable exceptions including Ireland, the U.K. and several states where the open periods are one year longer.

Solar Energy Projects

The Company holds equity investments in Solar Tax Credit (“STC”) investments. Primarily, the STC investments are structured as limited liability companies that invest in solar energy projects that are eligible to receive energy tax credits. During the six months ended July 31, 2024, the Company made investments of approximately $3.3 million in STC investments that were committed as of January 31, 2024. As of July 31, 2024, the Company had no remaining cash investment commitments related to its STC investments.

At July 31, 2024 and January 31, 2024, the investment accounts balances were $1.2 million and $2.1 million, respectively, which are included in right-of-use and other assets in the condensed consolidated balance sheets.

The Company has elected to use the proportional amortization method (“PAM”) for STC investments that qualify. Under PAM, an investment is amortized in proportion to the allocation of tax benefits received in each period, and the investment amortization and tax benefit amounts are presented net within income tax expense in the Company’s condensed consolidated statement of earnings. For the six months ended July 31, 2024, the Company recorded $0.7 million of investment amortization related to the STC investment that qualifies for PAM. For the three months ended July 31, 2024, the recorded amount of amortization related to this investment was not material. The amount of non-income tax-related activity and other returns related to this investment was not material for the three and six months ended July 31, 2024. During the six months ended July 31, 2023, the Company did not have any STC investments that qualified for PAM.

For the Company’s STC investments that do not qualify for PAM, the Company accounts for the investments using the equity method of accounting and includes income and losses related to the investment in other income in the Company’s condensed consolidated statements of earnings. For the three and six months ended July 31, 2024 and 2023, the Company’s share of activity from these STC investments was not material.