INCOME TAXES

12 Months Ended

Jan. 31, 2023

INCOME TAXES

INCOME TAXES

9. INCOME TAXES

                The provision for income taxes is based on the following pretax income (loss):

	Years Ended
	January 31,
Domestic and Foreign Pretax Income (Loss)	2023			2022
Domestic	$                15,322			$	1,519
Foreign		(9,851)			14,634
Total	$	5,471		$	16,153
	Years Ended
	January 31,
	2023			2022
Income Tax Expense (Benefit)
Current:
Federal	$	2		($171)
State and other taxes		68			88
Foreign		3,450			4,205
Total Current Tax Expense	$	3,520		$	4,122
Deferred:
Domestic	($756		)	$	526
Foreign		834			133
Total Deferred Tax Expense	$78			$	659
Total Income Taxes	$	3,598		$	4,781

The following is a reconciliation of the effective income tax rate to the Federal statutory rate:

	Years Ended January 31,
	2023			2022
Statutory rate		21.00	%		21.00	%
State Income Taxes, Net of Federal Tax Benefit		0.05	%		(0.01	)%
Adjustment to Deferred		13.54	%		(0.26	)%
GILTI		24.84	%		4.11	%
Foreign Tax Credit - GILTI		(14.86	)%		-
Section 250 Deduction		(15.74	)%		-
Permanent Differences		0.07	%		(0.83	)%
Valuation Allowance-Deferred Tax Asset		6.41	%		4.81	%
Foreign Tax Credit		(9.74	)%		(7.34	)%
Section 78 Gross-up		6.64	%		-
Argentina Flow Through Loss		1.09	%		1.36	%
Foreign Dividend & Subpart F		-			(5.27	)%
Withholding Taxes		36.55	%		-
Foreign Rate Differential		2.11	%		9.22	%
Change in State Apportionment Rate		(1.38	)%		3.52	%
Foreign employee benefits		(3.58	)%		-
Foreign Dividends Paid to U.S.		73.01	%		-
Foregin Dividends Received Deduction		(73.01	)%		-
Other		(1.25	)%		(0.71	)%
Effective Rate		65.74	%		29.60	%

The tax effects of temporary cumulative differences which give rise to deferred tax assets are summarized as follows:

	Years Ended January 31,
	2023			2022
Deferred tax assets:
Inventories	$	1,147		$	806
US tax loss carryforwards, including work opportunity credit		186			167
Accounts receivable and accrued rebates		278			145
Accrued compensation and other		123			211
India reserves - US deduction		22			32
Equity based compensation		1,178			807
Foreign tax credit carry-forward		3,123			3,209
State and local carry-forwards		18			16
Depreciation and amortization		(155	)		(186	)
Prepaid expenses		(175	)		(219	)
Brazil write-down		-			196
Right-of-use asset		(697	)		(738	)
Operating lease liability		732			762
Foreign carry-forwards		438			-
Withholding taxes		(769	)		-
Other		107			93
Deferred tax asset		5,556			5,282
Less valuation allowance		(3,561	)		(3,210	)
Net deferred tax asset	$	1,995		$	2,072

	January 31,
Balance sheet classification	2023		2022
Long-term deferred tax asset	$	2,764	$	2,072
Long-term deferred tax liability	$	769	-

The benefit relating to capital loss, operating loss, and credit carryforwards included in the above table at January 31, 2023, consisted of:

	Operating Loss		Benefit Amount		Valuation Allowance			Expiration Beginning In
State operating loss carryforwards	$	19,564	$	18	$	(1	)	2028
Foreign tax credit carryforwards				3,123		(3,123	)	2024
Federal credit carryforwards				186		-		2035
Mexico operating loss carryforwards		1,457		437		(437	)	2033
Total			$	3,764	$	(3,561	)

Significant net operating loss carryforwards were generated in the state of Alabama prior to the change in apportionment factor in 2021 which decreased the amount of income to be apportioned to Alabama in the future and therefore decreasing carryforward benefit available related to state operating losses.

               Indefinite Reinvestment Assertion 

We previously considered substantially all of the earnings in our non-U.S. subsidiaries to be indefinitely reinvested outside the U.S. and, accordingly, recorded no deferred income taxes on such earnings. At this time, the applicable provisions of the Tax Act have been fully analyzed and our intention with respect to unremitted foreign earnings is to continue to indefinitely reinvest outside the U.S. those earnings needed for working capital or additional foreign investment. During FY23 the Company changed its’ permanent reinvestment assertions for its Chinese operations due to increased volatility of the Chinese yuan and an updated evaluation of investment strategies. The Company’s plans are to repatriate a total of $20.0 million from China and recorded withholding taxes of $2.0 million which are included in income tax expense.  During FY23 the Company’s subsidiaries in Canada, China and Hong Kong declared and paid total dividends of $15.5 million of which $12.5 million came from China.

Income Tax Audits

The Company is subject to US federal income tax, as well as income tax in multiple US state and local jurisdictions and a number of foreign jurisdictions. Returns for the years since FY19 are still open based on statutes of limitation only.

Chinese tax authorities have performed limited reviews on all Chinese subsidiaries as of tax years 2008 through 2021 with no significant issues noted and we believe our tax positions are reasonably stated as of January 31, 2023. The 2022 tax review will be performed before May 31, 2023 in China.

Change in Valuation Allowance

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. The valuation allowance for the year ended January 31, 2023 and January 31, 2022 was $3.6 million and $3.2 million, respectively.