Income Taxes

12 Months Ended

Jan. 31, 2020

The domestic and foreign components of pre-tax loss were as follows:


	Year Ended January 31,
(in thousands)	2020		2019		2018
U.S.	$	(228,476)	$	(460,627)	$	(54,485)
International	24,920		32,419		5,343
Loss before income taxes	$	(203,556)	$	(428,208)	$	(49,142)

The components of our income tax provision (benefit) were as follows:


	Year Ended January 31,
(in thousands)	2020		2019		2018
Current
Federal	$	—	$	—	$	37
State	239		413		(46)
Foreign	3,277		2,838		4,139
Total current	3,516		3,251		4,130

Deferred
Federal	—		(7,083)		(110)
State	(43)		(2)		15
Foreign	1,330		2,084		(901)
Total deferred	1,287		(5,001)		(996)
Provision for (benefit from) income taxes	$	4,803	$	(1,750)	$	3,134

The reconciliation of the statutory federal income tax rate to our effective tax rate was as follows:


	Year Ended January 31,
(in thousands)	2020		2019		2018
U.S statutory rate	21.0	%	21.0	%	32.9	%
State taxes	3.5		3.1		10.9
Foreign tax rate differential	0.5		0.3		(7.3)
Stock-based compensation	47.2		17.5		38.3
Change in valuation allowance	(80.3)		(43.6)		28.2
Overall impact of federal tax rate change from 34% to 21%	—		—		(121.1)
Research and development credits	8.2		4.0		2.3
Other	(2.4)		(1.9)		9.4
Effective tax rate	(2.3)	%	0.4	%	(6.4)	%

The significant components of net deferred tax balances were as follows:


	January 31,
(in thousands)	2020		2019
Deferred tax assets
Net operating loss carryforwards	$	423,379	$	280,835
Accruals and reserves	5,668		3,180
Stock-based compensation	33,405		39,334
Operating lease liability	40,495		—
Research and development credits	39,480		22,876
Other	7,536		10,715
Total deferred tax assets	549,963		356,940
Deferred tax liabilities
Operating lease right-of-use asset	(32,736)		—
Deferred contract acquisition costs	(36,567)		(28,103)
Convertible debt	(24,737)		(29,531)
Acquired intangibles	(13,493)		(16,766)
Other	(1,457)		(3,885)
Total deferred tax liabilities	(108,990)		(78,285)
Less: Valuation allowance	(445,746)		(282,141)
Net deferred tax liabilities	$	(4,773)	$	(3,486)

We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts. Therefore, no deferred tax liabilities for foreign withholding taxes have been recorded relating to the earnings of our foreign subsidiaries.

In the years ended January 31, 2020, 2019 and 2018, total stock-based compensation expense was $206.4 million, $411.0 million and $29.7 million. Recognized tax benefits on total stock-based compensation expense, which are reflected in the "Provision for (benefit from) income taxes" in the consolidated statements of operations and comprehensive loss, were $1.0 million and $1.7 million in the years ended January 31, 2020 and 2019 and immaterial in the year ended January 31, 2018.

As of January 31, 2020, we had accumulated net operating loss carryforwards of $1.7 billion for federal and $856.8 million for state. Of the federal net operating losses, $105.8 million is carried forward indefinitely and is not limited to 80% of taxable income, and $1.2 billion is carried forward indefinitely, but is limited to 80% of taxable income. The remaining federal and state net operating loss carryforwards will begin to expire in 2025 and 2021. As of January 31, 2020, we also had total foreign net operating loss carryforwards of $16.6 million, which do not expire under local law.

As of January 31, 2020, we had accumulated U.S. research tax credits of $41.0 million for federal and $10.6 million for state. The U.S. federal research tax credits will begin to expire in 2033. The U.S. state research tax credits do not expire.

Available net operating losses may be subject to annual limitations due to ownership change limitations provided by the Internal Revenue Code, as amended (the "Code"), and similar state provisions. Under Section 382 of the Code, substantial changes in our ownership and the ownership of acquired companies may limit the amount of net operating loss carryforwards that are available to offset taxable income. Our ability to carry forward our federal and state net operating losses is limited due to an ownership change that occurred in a prior fiscal year. This limitation has been accounted for in calculating the available net operating loss carryforwards. The foreign jurisdictions in which we operate may have similar provisions that may limit our ability to use net operating loss carryforwards incurred by entities that we have acquired. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examination from various taxing authorities.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits was as follows:


	January 31,
(in thousands)	2020		2019
Unrecognized tax benefits balance at February 1	$	9,733	$	7,733
Gross increase for tax positions of prior years	90		—
Gross decrease for tax positions of prior years	(94)		(407)
Gross increase for tax positions of current year	3,156		2,407
Unrecognized tax benefits balance at January 31	$	12,885	$	9,733

As of January 31, 2020, the total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, would have been $2.5 million. A significant portion of the unrecognized tax benefit was recorded as a reduction in our gross deferred tax assets, offset by a reduction in our valuation allowance. We have net uncertain tax positions of $3.3 million, $2.9 million and $2.5 million included in other liabilities on our consolidated balance sheet as of January 31, 2020, 2019 and 2018.

We do not expect our gross unrecognized tax benefit to change significantly within the next 12 months. We recognize interest and penalties related to uncertain tax positions in provision for income taxes. As of January 31, 2020, accrued interest or penalties was $0.8 million.

Our tax years from inception in 2003 through January 31, 2020, remain subject to examination by the U.S. and California, as well as various other jurisdictions. We are under examination by the Israeli Tax Authorities for the calendar years 2013 through 2016.

We recognize valuation allowances on deferred tax assets if it is more likely than not that some or all the deferred tax assets will not be realized. Due to our history of losses in the U.S., the net cumulative U.S. deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $163.6 million in the year ended January 31, 2020 and by $163.0 million in the year ended January 31, 2019. The following table represents the rollforward of our valuation allowance:


	Year Ended January 31,
(in thousands)	2020		2019		2018
Beginning balance	$	282,141	$	119,153	$	133,029
Valuation allowance charged to income tax provision	163,605		201,646		56,566
Adoption of new accounting principle	—		—		5,610
Valuation allowance credited as a result of U.S. Tax Act	—		—		(59,520)
Convertible senior notes issued	—		(31,594)		—
Acquisition of SpringCM	—		(7,064)		—
Valuation allowance credited to income tax provision	—		—		(16,532)
Ending balance	$	445,746	$	282,141	$	119,153