Income Taxes

6 Months Ended

Aug. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

(13) Income Taxes

The Company’s provision for income taxes consists of federal, foreign, and state taxes necessary to align the Company’s year-to-date tax provision with the annual effective rate that it expects to achieve for the full year. At each interim period, the Company updates its estimate of the annual effective tax rate and records cumulative adjustments, as necessary.

The Inflation Reduction Act of 2022 (the “Act”) was signed into U.S. law on August 16, 2022. The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives, and a corporate alternative minimum tax that generally applies to U.S. corporations with average adjusted financial statement income over a three year period in excess of $1 billion. The Company does not expect the Act to materially impact its financial statements.

For the three months ended August 31, 2022, the Company recorded an income tax benefit of $708, which includes a discrete income tax benefit of $9 related primarily to the remeasurement of state deferred taxes based on law changes enacted during the quarter. For the three months ended August 31, 2021, the Company recorded an income tax benefit of $217, which includes a discrete income tax benefit of $70 related primarily to the reversal of uncertain tax position liabilities as a result of the lapse of the applicable statute of limitations.

The effective tax rates for the three months ended August 31, 2022 and 2021 were an income tax benefit of 6.1% on a pre-tax loss of $11,627 and an income tax benefit of 23.9% on a pre-tax loss of $909, respectively. The effective tax rate for the three months ended August 31, 2022 differs from the U.S. statutory rate of 21% as a result of a number of factors, including the non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates, and a tax benefit related to the decrease in the valuation allowance based on current year forecasted earnings. The effective tax rate for the three months ended August 31, 2021 differed from the statutory rate of 21% primarily due to a number of factors, including the non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates, and a tax benefit related to the decrease in the valuation allowance.

For the six months ended August 31, 2022, the Company recorded an income tax benefit of $1,800, which includes a discrete income tax benefit of $172 related primarily to the reversal of uncertain tax position liabilities as a result of the lapse of the applicable statute of limitations. For the six months ended August 31, 2021, the Company recorded an income tax provision of $267, which includes a discrete income tax benefit of $144 related primarily to the reversal of uncertain tax position liabilities as a result of the lapse of the applicable statute of limitations.

The effective tax rates for the six months ended August 31, 2022 and 2021 were an income tax benefit of 8.8% on pre-tax loss of $20,566 and an income tax provision of 19.5% on pre-tax income of $1,372, respectively. The effective tax rate for the six months ended August 31, 2022 and 2021 differs from the U.S. statutory rate of 21% as a result of a number of factors, including the non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates, and a decrease in valuation allowance.

At August 31, 2022, the Company had an uncertain tax position liability of $907, including interest and penalties. The unrecognized tax benefits include amounts related to various U.S. federal, state, and local, and foreign tax issues.