Income Taxes

9 Months Ended

Oct. 31, 2023

Income Taxes

Income Taxes

10. Income Taxes

The Company’s provision for income taxes for the three and nine months ended October 31, 2023 and 2022 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company’s effective tax rate for the third quarter of FY24 was 26.4%, which differs from the U.S. federal statutory rate of 21% primarily due to rate differentials in foreign tax jurisdictions and Global Intangible Low-Taxed Income (“GILTI”).  The Company's effective tax rate for the third quarter of FY23 was 33.3% which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and state income taxes.

The Company's effective tax rate for the nine months ended October 31, 2023 was 29.5%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI. The Company’s effective tax rate for the nine months ended October 31, 2022 was 68.1%.  The Company recorded $2 million in withholding taxes for a planned repatriation of cash from our China operations.  In addition to the $2 million discrete item, in Q1 FY23, the Company recorded deferred tax benefits of $0.2 million related to accruals for China social taxes based on our evaluation of the deductibility of these items.  Excluding these discrete items, the effective rate was 33.8%, which differs from the U.S. federal statutory rate of 21%, primarily due to rate differentials in foreign tax jurisdictions and GILTI.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. The valuation allowance was $4.0 million and $3.6 million at October 31, 2023 and January 31, 2023, respectively.