Income Taxes

12 Months Ended

Jan. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The domestic and foreign components of pre-tax loss for the years ended January 31, 2022, 2021 and 2020 were as follows (in thousands):

	Year Ended January 31,
	2022		2021		2020
Domestic	$	(903,227)	$	(282,026)	$	(220,846)
Foreign	53,531		15,835		10,514
Loss before provision for (benefit from) income taxes	$	(849,696)	$	(266,191)	$	(210,332)

The components of the provision for (benefit from) income taxes for the years ended January 31, 2022, 2021 and 2020 were as follows (in thousands):

	Year Ended January 31,
	2022		2021		2020
Current:
Federal	$	262	$	11	$	33
State	329		136		86
Foreign	4,210		1,294		822
Total current provision for income taxes	4,801		1,441		941
Deferred:
Federal	(7,407)		51		(518)
State	(1,335)		5		(406)
Foreign	2,656		(1,356)		(1,436)
Total deferred benefit from income taxes	(6,086)		(1,300)		(2,360)
Total provision for (benefit from) income taxes	$	(1,285)	$	141	$	(1,419)

For the tax year ended January 31, 2022, the income tax benefit resulted from the release of valuation allowance in the United States in connection with acquisitions and excess tax benefits from stock-based compensation in the United Kingdom, offset by income tax expense related to profitable foreign jurisdictions. For the tax year ended January 31, 2021, the income tax expense from profitable jurisdictions was partially offset by excess tax benefits from stock-based compensation in the United Kingdom. For the tax year ended January 31, 2020, the income tax benefit resulted from the release of valuation allowance in the United States in connection with an acquisition and excess tax benefits from stock-based compensation in the United Kingdom. These income tax benefits and expense in these years were partially offset by foreign income taxes, state taxes and tax amortization of goodwill.

 The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended January 31, 2022, 2021 and 2020:

	Year Ended January 31,
	2022		2021		2020
Tax at federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	3.9		4.1		4.0
Change in valuation allowance	(36.1)		(101.0)		(100.1)
Stock-based compensation	8.4		70.2		59.8
Research and development credits	3.6		6.4		18.0
Other, net	(0.6)		(0.8)		(2.0)
Effective tax rate	0.2	%	(0.1)	%	0.7	%

The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2022 and 2021 were as follows (in thousands):

	As of January 31,
	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	955,272	$	607,483
Stock-based compensation	48,254		18,952
Deferred revenue	4,630		1,144
Operating lease liabilities	49,669		51,702
Other reserves and accruals	28,631		16,586
Research and development and other credits	91,782		57,060
Disallowed interest	6,949		6,091
Total deferred tax assets	1,185,187		759,018
Valuation allowance	(904,173)		(555,199)
Total deferred tax assets, net	281,014		203,819
Deferred tax liabilities:
Convertible debt	(91,530)		(112,547)
Deferred commissions	(67,527)		(38,710)
Capitalized internal-use software costs	(2,993)		(2,691)
Goodwill	(195)		(306)
Operating lease right-of-use assets	(36,713)		(37,522)
Depreciation and amortization	(78,279)		(8,522)
Total deferred tax liabilities	(277,237)		(200,298)
Net deferred tax assets	$	3,777	$	3,521

As a result of continuing losses, the Company has determined that it is not more likely than not that it will realize the benefits of the U.S. deferred tax assets and, therefore, the Company has recorded a valuation allowance to reduce the carrying value of the U.S. deferred tax assets, net of U.S. deferred tax liabilities. The U.S. valuation allowance increased by $349.0 million and $193.6 million during the years ended January 31, 2022 and 2021, respectively.

As of January 31, 2022, the Company had approximately $3,783.5 million of federal and $2,254.3 million of state net operating loss carryforwards available to offset future taxable income. If not utilized, the federal and state net operating loss carryforwards will begin to expire in 2029 and 2023, respectively. As of January 31, 2022, the Company had approximately $64.7 million of UK net operating losses which do not expire.

As of January 31, 2022, the Company had federal research and development tax credit carryforwards of $80.2 million and California research and development tax credit carryforwards of $53.6 million. The federal research and development credits will start to expire in 2030 while the California research and development credits do not expire.

The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax laws.

Accounting guidance for income taxes requires a deferred tax liability to be established for the U.S. tax impact of undistributed earnings of foreign subsidiaries unless it can be shown that these earnings will be permanently reinvested outside the U.S. If the Company repatriated its accumulated foreign earnings, any deferred income taxes for the estimated U.S. income tax, foreign income tax, and applicable withholding taxes on earnings of subsidiaries is insignificant. The Company is subject to taxation in the United States and various states and foreign jurisdictions.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future use of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. The CARES Act did not have a material impact on the consolidated financial statements.

A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows (in thousands):

	Year Ended January 31,
	2022		2021		2020
Gross amount of unrecognized tax benefits as of the beginning of the year	$	22,224	$	15,987	$	23,931
Additions based on tax positions related to a prior year	5,124		—		658
Additions based on tax positions related to current year	9,207		7,189		6,866
Reductions based on tax positions taken in a prior year	—		(952)		(15,468)
Gross amount of unrecognized tax benefits as of the end of the year	$	36,555	$	22,224	$	15,987

The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. As the Company has net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all years. For material foreign jurisdictions, the tax years open to examination include the tax years 2016 and forward.

As of January 31, 2022, the Company has an immaterial amount of unrecognized tax benefits that if recognized would impact the effective tax rate. As of January 31, 2021 and 2020, the Company had no unrecognized tax benefits that if recognized would impact the effective tax rate. The Company's policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of January 31, 2022, 2021 and 2020 the Company has not accrued a material amount in interest and penalties related to unrecognized tax benefits. The Company does not have any significant uncertain tax positions as of January 31, 2022 for which it is reasonably possible that the positions will increase or decrease within the next twelve months.