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Income Taxes
3 Months Ended
Apr. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
For the three months ended April 30, 2018 and 2017, the Company recorded a tax benefit of $0.2 million and a tax provision of $0.2 million on a pretax loss of $26.2 million and $27.5 million, respectively. The effective tax rate for the three months ended April 30, 2018 and 2017 was 0.9% and (0.9)%, respectively. The effective tax rate for the three months ended April 30, 2018 differs from the statutory rate primarily as a result of tax benefits from stock-based compensation in the United Kingdom, providing no benefit on pretax losses incurred in the United States, as the Company has determined that the benefit of the losses is not more likely than not to be realized, and changes to provisional amounts recorded for certain aspects of the Tax Act. The effective tax rate for the three months ended April 30, 2017 differs from the statutory rate primarily as a result of the Company not providing any benefit on pretax losses incurred in the United States, as the Company has determined that the benefit of the losses is not more likely than not to be realized.
The difference between the book and tax bases of the 2023 Notes, Note Hedges and debt issuance costs resulted in deductible temporary differences and corresponding deferred tax assets of $0.6 million, which are subject to a full valuation allowance.
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease to 21% effective for tax years beginning after December 31, 2017, and changes to how the United States imposes income tax on multinational corporations.
In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The Company recorded a provisional amount of $61.0 million as of January 31, 2018 related to the remeasurement of certain deferred tax balances before valuation allowance. For the three months ended April 30, 2018, the Company has not made a material adjustment to the provisional amount. The Company will continue to analyze and refine the calculations to the measurement of these balances. For the three months ended April 30, 2018, no other changes have been made to the provisional amounts previously recorded. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.
The United Kingdom tax authority completed its examination of fiscal year 2016 income tax returns for the Company’s UK subsidiary during the three months ended April 30, 2018. As a result, the Company’s UK subsidiary is no longer subject to examination for fiscal years prior to 2017.