Income Taxes

3 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 6—Income Taxes

Effective Tax Rate

The effective income tax rate for the first quarter of fiscal 2023 was 30.8%, which was an income tax benefit on a pre-tax book loss, compared to 21.8% for the first quarter of fiscal 2022, which was an income tax provision on pre-tax book income. The change in the effective tax rate was caused by the fact that the rate fluctuated between benefit and provision status. Specifically, favorable permanent book-tax differences and tax credits increased the benefit rate for the first quarter of fiscal 2023 and decreased the provision rate for the first quarter of fiscal 2022 relative to the statutory rate. In addition, there was a revaluation of the deferred tax liability due to favorable state tax law changes, which reduced the effective tax rate for the first quarter of fiscal 2022.

The effective tax rate is subject to change based on the mix of income from different state jurisdictions, which tax at different rates, as well as the change in status or outcome of uncertain tax positions. The Company evaluates its effective tax rate on a quarterly basis and updates its estimate of the full-year effective rate as necessary.

Reserves for Uncertain Tax Positions

At the end of the first quarter of fiscal 2023, unrecognized tax benefits were $1.2 million, of which $0.9 million would affect the effective tax rate, if recognized. The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The total amount of interest and penalties accrued at the end of the first quarter of fiscal 2023 was $0.1 million compared to $0.2 million of interest and penalties accrued as of the end of the first quarter of fiscal 2022. Within the next 12 months, it is reasonably possible that uncertain tax positions could be reduced by approximately $0.4 million resulting from resolution or closure of tax examinations. Any increase in the amount of uncertain tax positions within the next 12 months is expected to be insignificant.