Income Taxes

12 Months Ended

Feb. 02, 2020

The geographical breakdown of loss before provision for income taxes is as follows (in thousands):


	Fiscal Year Ended
	2018		2019		2020

Domestic	$	(117,391)	$	(145,428)	$	(212,672)
International	(38,598)		(31,845)		18,006
Total	$	(155,989)	$	(177,273)	$	(194,666)

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


	Fiscal Year Ended
	2018		2019		2020
Current:
State	$	525	$	571	$	538
Foreign	3,580		4,214		7,774
Total	$	4,105	$	4,785	$	8,312
Deferred:
Federal	$	—	$	(2,776)	$	(1,559)
State	—		(920)		(198)
Foreign	(216)		—		(234)
Total	$	(216)	$	(3,696)	$	(1,991)
Provision for income taxes	$	3,889	$	1,089	$	6,321

The reconciliation of the federal statutory income tax rate and effective income tax rate is as follows (in thousands):


	Fiscal Year Ended
	2018		2019		2020

Tax at federal statutory rate	$	(51,314)	$	(37,227)	$	(40,880)
State tax, net of federal benefit	351		(469)		210
Stock-based compensation expense	(9,953)		(28,437)		(6,683)
Research and development tax credits	(7,629)		(10,371)		(11,033)
Foreign rate differential	18,667		12,299		2,935
Change in valuation allowance	(44,784)		85,533		61,050
Foreign on-shoring intellectual property	—		(20,371)		—
Remeasurement of deferred tax assets and liabilities due to tax reform	97,280		—		—

Other	1,271		132		722
Provision for income taxes	$	3,889	$	1,089	$	6,321

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of our deferred tax assets and liabilities were as follows (in thousands):


	At the End of Fiscal
	2019		2020

Deferred tax assets:
Net operating loss carryforwards	$	189,117	$	232,155
Tax credit carryover	50,848		76,209
Accruals and reserves	12,506		11,489
Deferred revenue	43,579		60,473
Stock-based compensation expense	31,743		31,906
Depreciation and amortization	23,545		18,893
Charitable contribution carryforwards	2,850		2,835
ASC 842 lease liabilities	—		25,197
Other	81		—
Total deferred tax assets	$	354,269	$	459,157
Valuation allowance	(307,475)		(385,791)
Total deferred tax assets, net of valuation allowance	$	46,794	$	73,366
Deferred tax liabilities:
Deferred commissions	$	(27,537)	$	(30,628)
Convertible debt	(14,230)		(11,226)
ASC 842 right-of-use assets	—		(23,502)
Acquired intangibles and goodwill	(3,967)		(10,421)

Other	—		(1,729)
Total deferred tax liabilities	$	(45,734)	$	(77,506)
Net deferred tax assets (liabilities)	$	1,060	$	(4,140)

At the end of fiscal 2020, the undistributed earnings of $40.9 million from non-U.S. operations held by our foreign subsidiaries are designated as permanently reinvested outside the U.S. Accordingly, no additional U.S. income taxes or additional foreign withholding taxes have been provided thereon. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

At the end of fiscal 2020, we had net operating loss carryforwards for federal income tax purposes of approximately $960.2 million and state income tax purposes of approximately $509.8 million. These net operating loss carryforwards will expire, if not utilized, beginning in 2028 for federal and state income tax purposes.

We had federal and state research and development tax credit carryforwards of approximately $55.2 million and $48.3 million at the end of fiscal 2020. The federal research and development tax credit carryforwards will expire commencing in 2028, while the state research and development tax credit carryforwards have no expiration date.

Realization of deferred tax assets is dependent on future taxable income, the existence and timing of which is uncertain. Based on our history of losses, management has determined that it is more likely than not that the U.S. deferred tax assets will not be realized, and accordingly has placed a full valuation allowance on the net U.S. deferred tax assets. The valuation allowance increased by $85.5 million and $78.3 million, respectively, during fiscal years ended 2019 and 2020.

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In February 2020, we completed an analysis through the end of fiscal 2020 to evaluate whether there are any limitations of our net operating loss carryforwards and concluded no limitations currently exist.

Uncertain Tax Positions

The activity related to the unrecognized tax benefits is as follows (in thousands):


	Fiscal Year Ended
	2018		2019		2020
Gross unrecognized tax benefits—beginning balance	$	6,375	$	12,401	$	18,891
Decreases related to tax positions taken during prior years	(24)		(845)		(34)
Increases related to tax positions taken during prior years	619		—		408

Increases related to tax positions taken during current year	5,431		7,335		9,305
Gross unrecognized tax benefits—ending balance	$	12,401	$	18,891	$	28,570

At the end of fiscal 2020, our gross unrecognized tax benefit was approximately $28.6 million, $0.9 million of which if recognized, would have an impact on the effective tax rate.

At the end of fiscal 2020, we had no current or cumulative interest and penalties related to uncertain tax positions.

It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on our assessment, including experience and complex judgments about future events, we do not expect that changes in the liability for unrecognized tax benefits during the next twelve months will have a significant impact on our consolidated financial position or results of operations.

We file income tax returns in the U.S. federal jurisdiction as well as many U.S. states and foreign jurisdictions. The tax returns for fiscal years 2009 and forward remain open to examination by the major jurisdictions in which we are subject to tax. The tax returns for fiscal years outside the normal statutes of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.