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Income Taxes
 12 Months Ended
Jan. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax benefit for the last two years is reconciled to the statutory federal income tax rates of 21% for the tax years ended January 31, is as follows (in thousands):
20222021
Statutory$(782)$(625)
State taxes (net of federal tax)14 9 
Change in valuation allowance12,303 (119)
State rate adjustment(197)(104)
Change in unrecognized tax benefits5 (4)
Stock Compensation48 85 
Expirations of attributes55 16 
Permanent differences(31)11 
Return to provision(7)(13)
Income tax expense (benefit)$11,408 $(744)
Significant components of the benefit for income taxes attributed to continuing operations are as follows for the years ended January 31, is as follows (in thousands):
 20222021
Current
Federal$— $— 
State92 (2)
92 (2)
Deferred
Federal(731)(555)
State(256)(68)
(987)(623)
Change in valuation allowance12,303 (119)
11,316 (742)
Income tax expense (benefit)$11,408 $(744)
Deferred tax assets and liabilities are comprised of the following as of January 31, respectively, as follows (in thousands):
 20222021
Deferred tax assets
Accrued vacation and sick leave$943 $835 
Retirement plans3,930 5,657 
Insurance reserves300 293 
Warranty154 181 
Net operating loss carryforwards4,445 4,501 
Right of use liabilities4,159 5,237 
  Inventory2,124 1,287 
  Business interest expense limitation— — 
Other361 324 
$16,416 $18,315 
Deferred tax liabilities
Tax in excess of book depreciation$(984)$(924)
Right of use assets(3,567)(4,541)
Other(54)(70)
$(4,605)$(5,535)
Valuation allowance(11,412)(1,064)
Net long term deferred tax asset$399 $11,716 

In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or reversal of deferred tax liabilities during the periods in which those temporary differences become deductible. As a part of this evaluation, the Company assesses all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, the availability of tax carry backs, tax-planning strategies, and results of recent operations (including cumulative losses in recent years), to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. During 2022 and 2021 the Company incurred operating losses and when combined with operating results from 2020, the Company has incurred a cumulative operating loss for the last three years. As a result, the Company has identified objective and verifiable negative evidence in the form of cumulative losses in the U.S. and in certain state jurisdictions over the preceding twelve quarters ended January 31, 2022. While the Company has taken significant measures to return to profitability, and order rates at the beginning of the year are favorable, the short-term outlook for the school furniture market is challenging, particularly relating to ongoing supply chain difficulties. During the fourth quarter of the year ended January 31, 2022, based on this evaluation, and after considering future reversals of existing taxable temporary differences and the effects of seasonality on the Company’s business, the Company determined the realization of a majority of the net deferred tax assets no longer met the more likely than not criteria and a valuation allowance was recorded against the majority of the net deferred tax assets. Valuation allowances of $11,412,000 are needed for federal and certain state net operating loss carryforwards to reduce the carrying amount of deferred tax assets to an amount that is more likely than not to be realized. At January 31, 2022, the Company has net operating loss carryforwards of approximately $12,513,000 for U.S. federal, with no expirations, and $31,222,000 for state income tax purposes, expiring at various dates through January 31, 2041. At January 31, 2021, the Company recorded a partial valuation allowance of $1,064,000 against its net deferred tax assets. The net change in the valuation allowance for the year ended January 31, 2022, was an increase of $10,348,000 and for the year ended January 31, 2021, was a decrease of $119,000.
The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended January 31, respectively, as follows (in thousands):
 20222021
Balances as of February 1,$54 $60 
Increases related to prior year tax positions— — 
Decreases related to prior year tax positions(1)(4)
Increases related to current year tax positions10 8 
Decreases related to lapsing of statute of limitations(6)(10)
Balance as of January 31,$57 $54 
At January 31, 2022, the Company’s unrecognized tax benefits associated with uncertain tax positions were $57,000, of which $45,000 if recognized, would favorably affect the effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense which is consistent with the recognition of the items in prior reporting. The Company had recorded a liability for interest and penalties related to unrecognized tax benefits of $13,000 at January 31, 2022, and $11,000 at January 31, 2021. The year ended January 31, 2017 and subsequent years remain open for examination by the IRS and state tax authorities. The Company is currently under IRS examination for fiscal year ended January 31, 2016. The Company is not currently under state examinations.
The specific timing of when the resolution of each tax position will be reached is uncertain. As of January 31, 2022, it is reasonably possible that unrecognized tax benefits will decrease by $6,000 within the next 12 months due to the expiration of the statute of limitations.
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The Company has performed an analysis of the impact of the CARES Act and determined the impact is not significant.