Income Taxes

12 Months Ended

Apr. 30, 2022

Income Taxes

Income Taxes

16.          Income Taxes

The components of income before income taxes are as follows (in thousands):

	Year Ended April 30,
	2022		2021		2020
Domestic	$	(10,187)	$	34,274	$	52,730
Foreign		(8,956)		91		(60)
Income from continuing operations before income taxes		(19,143)		34,365		52,670
Equity method investment loss		5,889		(10,481)		(5,487)
Total income from continuing operations before income taxes	$	(13,254)	$	23,884	$	47,183

The Company expects any foreign earnings to be reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S. income taxes on undistributed earnings are recorded. The foreign subsidiaries do not have any undistributed earnings.
​

A reconciliation of income tax expense computed using the U.S. federal statutory rates to actual income tax expense is as follows:

	Year Ended April 30,
	2022		2021		2020
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Foreign rate differential	4.9		—		—
State and local income taxes, net of federal benefit	40.8		(1.4)		(2.1)
R&D and other tax credits	23.0		(11.5)		(6.8)
Valuation allowance	(37.4)		3.2		3.4
Return to provision adjustments	(0.9)		(0.3)		0.1
Permanent items	(3.3)		3.6		0.7
Foreign derived intangible income	—		(7.6)		(3.9)
Excess benefit of equity awards	5.2		(5.7)		(1.5)
Other	0.9		0.3		0.2
Effective income tax rate	54.2	%	1.6	%	11.1	%

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

	Year Ended April 30,
	2022		2021		2020
Current:
Federal	$	(3,025)	$	3,094	$	3,005
State		165		448		390
Foreign		279		—		—
		(2,581)		3,542		3,395
Deferred:
Federal		(5,764)		(3,247)		2,063
State		483		244		421
Foreign		(2,507)		—		(31)
		(7,788)		(3,003)		2,453
Total income tax expense	$	(10,369)	$	539	$	5,848

Significant components of the Company’s deferred income tax assets and liabilities are as follows (in thousands):

	April 30,
	2022		2021
Deferred income tax assets:
Accrued expenses	$	3,399	$	4,422
Stock based compensation		1,892		2,492
Allowances, reserves, and other		4,455		1,482
Outside basis difference		89		4,617
Unrealized loss on securities		3,229		110
Net operating loss and credit carry-forwards		41,931		33,155
Intangibles basis		—		—
Lease liability		6,303		5,645
Total deferred income tax assets		61,298		51,923
Deferred income tax liabilities:
Fixed asset basis		(10,413)		(10,286)
Right-of-use asset		(5,878)		(5,119)
Intangibles basis		(15,503)		(17,004)
Total deferred income tax liabilities		(31,794)		(32,409)
Valuation allowance		(24,840)		(17,453)
Net deferred tax assets	$	4,664	$	2,061

At April 30, 2022 and 2021 the Company recorded a valuation allowance of $24,840,000 and $17,453,000, respectively, primarily against state R&D credits as the Company is currently generating more tax credits than it will utilize in future years and against capital loss carryforward. The valuation allowance increased by $7,387,000 and $3,304,000 for April 30, 2022 and April 30, 2021, respectively.

At April 30, 2022 the Company had state credit carryforwards of $31,379,000 that do not expire and federal tax credit carryforwards of $5,875,000 that begin to expire in 2041.

At April 30, 2022, the Company had federal, state and foreign net operating loss carryforwards of approximately $88,863,000, $93,485,000 and $64,000, respectively. The federal and $47,000 of the state net operating losses carry forward indefinitely. $93,438,000 of state net operating losses will begin expiring in fiscal year 2032, and the foreign loss carryforward will begin expiring in fiscal year 2023. Utilization of federal and state net operating loss carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code, as amended and similar state provisions.

At April 30, 2022 and 2021, the Company had approximately $17,806,000 and $17,556,000, respectively, of unrecognized tax benefits of which $4,969,000 would impact the Company’s rate and $9,956,000 would result in an increase in valuation allowance. The Company estimates that $3,263,000 of its unrecognized tax benefits will decrease in the next twelve months due to statute of limitation expiration.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended April 30, 2022 and 2021 (in thousands):

	April 30,
	2022		2021
Balance as of May 1	$	17,556	$	14,347
Increases related to prior year tax positions		415		1,305
Decreases related to prior year tax positions		(239)		(116)
Increases related to current year tax positions		1,398		2,074
Decreases related to lapsing of statute of limitations		(1,324)		(54)
Balance as of April 30	$	17,806	$	17,556

The Company records interest and penalties on uncertain tax positions to income tax expense. As of April 30, 2022 and 2021, the Company had accrued approximately $302,000 and $23,000, respectively, of interest and penalties related to uncertain tax positions. The Company is currently under audit by various state jurisdictions. The 2018 to 2021 tax years remain open to examination by the IRS for federal income taxes. The tax years 2010 to 2012 and 2018 to 2021 remain open for major state taxing jurisdictions.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, a $2 trillion relief package comprising a combination of tax provisions and other stimulus measures. The CARES Act broadly provides entities tax payment relief and significant business incentives and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, or the Tax Act. The tax relief measures for entities include a five-year net operating loss carry back, increases interest expense deduction limits, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property. The Act also provides other non-income tax benefits, including federal funding for a range of stabilization measures and emergency funding to assist those impacted by the COVID-19 pandemic. Similar legislation is being enacted in other jurisdictions in which the Company operates. ASC Topic 740, Income Taxes, requires the effect of changes in tax rates and laws on deferred tax balances to be recognized in the period in which new legislation is enacted. The enactment of the CARES Act and similar legislation in other jurisdictions in which the Company operates was not material to the Company’s income tax benefit for the year ended April 30, 2022.