Income Taxes

9 Months Ended

Oct. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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 carrybacks, tax-planning strategies, and results of recent operations, to determine whether sufficient future taxable income will be generated to realize existing deferred tax assets. Valuation allowances of $218,000, $251,000 and $255,000 as of October 31, 2024, January 31, 2024 and October 31, 2023, respectively, are needed for federal deferred tax assets 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. The net change in the valuation allowance for the three months and nine months ended October 31, 2024 was $0 and a decrease of $33,000, respectively. The net change in the valuation allowance for the three months and nine months ended October 31, 2023 was a decrease of $135,000 and a decrease of $609,000, respectively.

For the three months ended October 31, 2024 and 2023, the effective income tax rates were 25.5% and 24.5%, respectively. For the nine months ended October 31, 2024 and 2023, the effective income tax rates were 24.4% and 24.0%, respectively. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.

The January 31, 2019 and subsequent fiscal years remain open for examination by the IRS and state tax authorities. The Company is not currently under any state examination.