Income Taxes

3 Months Ended

Jan. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

To determine our income tax expense or benefit for interim periods, consistent with accounting standards, we apply the estimated annual effective income tax rate to year-to-date results. Our estimated annual effective tax rates for the three months ended January 31, 2020 and 2019 was 20.5% and 24.0%, respectively, excluding discrete items. The 2020 effective rate was impacted by an additional discrete charge of $0.4 million related to the vesting or exercise of equity-based compensation awards.

The 2019 effective rate was primarily impacted by a net charge of $1.4 million related to global intangible low-taxed income and foreign-derived intangible income, as well as discrete charges of $0.6 million for the adjustment of the one-time mandatory transition tax on deemed repatriation of previously tax-deferred and unremitted foreign earnings and $0.3 million related to the vesting or exercise of equity-based compensation awards.

As of January 31, 2020, our liability for uncertain tax positions (UTP) of $0.6 million relates to certain state tax items regarding the interpretation of tax laws and regulations. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. The final outcome of the future tax consequences of legal proceedings, if any, as well as the outcome of competent authority proceedings, changes in regulatory tax laws, or interpretation of those tax laws could impact our financial statements. We are subject to the effect of these matters occurring in various jurisdictions. The disallowance of the UTP would not materially affect the annual effective tax rate. We do not believe any of the UTP at January 31, 2020 will be recognized within the next twelve months.

We evaluate the likelihood of realization of our deferred tax assets by considering both positive and negative evidence. We maintain a valuation allowance for certain state net operating losses which totaled $1.6 million at January 31, 2020 and October 31, 2019.

Final regulations were published by the Internal Revenue Service and U.S. Department of the Treasury regarding Uniform Capitalization (UNICAP) that became effective during fiscal 2020. We are evaluating the regulations but do not believe there will be a material impact on our consolidated financial statements.