Income Taxes

6 Months Ended

Jul. 31, 2025

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 $216,000, $236,000 and $218,000 as of July 31, 2025, January 31, 2025 and July 31, 2024, respectively, are needed for 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. There was no change in the valuation allowance for the three months ended July 31, 2025 and a decrease of $20,000 for the six months ended July 31, 2025. The net change in the valuation allowance for the three months and six months ended July 31, 2024 was an increase of $1,000 and decrease of $33,000, respectively.

For the three months ended July 31, 2025 and 2024, the effective income tax rates were 28.1% and 23.7%, respectively. For the six months ended July 31, 2025 and 2024, the effective income tax rates were 28.0% and 23.9%, respectively. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.

The January 31, 2022 and subsequent fiscal years remain open for examination by the IRS and some state jurisdictions. The January 31, 2021 and subsequent fiscal years remain open for the remaining state jurisdictions. The Company is not currently under federal or state examination.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act, which includes a broad range of tax reform provisions, was signed into law in the United States. FASB Topic 740, Income Taxes, requires the effects of tax law changes to be recognized in the period of enactment. As the legislation was signed into law before the close of the second quarter, the impacts are contemplated in our operating results for the six months ended July 31, 2025. Among other provisions, the OBBB repealed the capitalization of domestic research and development expenditures, extended bonus depreciation on fixed assets, and includes a reduced deduction rate on foreign-derived deduction eligible income and income from non-U.S. subsidiaries. We're still evaluating these provisions, but we do not expect them to have a material impact on our effective tax rate and deferred tax assets in the fiscal year ending January 31, 2026, or in future periods.