13. Income Taxes

The following table provides details of income taxes for the periods indicated:

	Three Months Ended July 31,						Six Months Ended July 31,
	2018			2017			2018			2017
	(in thousands)
Income (loss) before income taxes	$	(5,950	)	$	5,529		$	(15,108	)	$	8,299
Provision for income taxes		927			2,226			1,775			2,432
Effective tax rate	(15.6%)				40.3	%	(11.7%)				29.3	%

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law in the United States. The new tax legislation contains several provisions that will impact the Company, including the reduction of the corporate income tax rate from 35% to 21%, acceleration of business asset expensing, and a reduction in the amount of executive pay that may qualify as a tax deduction, among others. Income tax expense recorded for the three and six months ended July 31, 2018 includes the impact of the new tax legislation as currently interpreted by the Company.

Due to the complexities of the new tax legislation, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”) which allows for the recognition of provisional amounts during a measurement period. The measurement period begins in the reporting period that includes the Tax Act’s enactment date and ends when the additional information is obtained, prepared, or analyzed to complete the accounting requirements under ASC Topic 740. The measurement period should not extend beyond one year from the enactment date. The Company recorded provisional estimates for the fiscal year ended January 31, 2018 for the following: the revaluation of deferred tax assets and liabilities to reflect the 21 percent corporate tax rate, whether to elect to expense or depreciate new capital equipment, and the US state tax impact to the aforementioned items. As of July 31, 2018, the Company continues to evaluate the provisional amounts recorded for the fiscal year ended January 31, 2018 and has recorded no adjustments. The Company will continue to assess the impact of the new tax legislation, as well as its application to its business operations.

The decreased income tax expense for the three and six months ended July 31, 2018 was primarily due to a reduction in the U.S. statutory rate from 35% to 21%, and a decrease in non-deductible stock-based compensation expense, which was partially offset by a decrease in the proportion of profits generated in lower tax jurisdictions and losses incurred in jurisdictions for which the Company was not able to recognize a related tax benefit.

The Company files federal and state income tax returns in the United States and in various foreign jurisdictions. The tax years 2013 to 2017 remain open to examination by U.S. federal tax authorities. The tax years 2008 to 2017 remain open to examination by U.S. state tax authorities. The tax years 2012 to 2017 remain open to examination by foreign tax authorities. Fiscal years outside of the normal statute of limitations remain open to audit by tax authorities due to tax attributes generated in those earlier years, which have been carried forward and may be audited in subsequent years when utilized.

The Company regularly assesses the likelihood of adverse outcomes resulting from potential tax examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments. As of July 31, 2018, the gross amount of unrecognized tax benefits was approximately $35.8 million. If the estimates of income tax liabilities prove to be less than the ultimate assessment, then a further charge to expense could be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities could result in tax benefits being recognized in the period in which the Company determines the liabilities are no longer necessary. The Company does not anticipate significant changes to its uncertain tax positions during the next twelve months.