Income Taxes

3 Months Ended

May 31, 2021

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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act made various tax law changes, including among other things (i) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest (ii) enacted technical corrections so that qualified improvement property can be immediately expensed under IRC Section 168(k) and net operating losses arising in tax years beginning in 2017 and ending in 2018 can be carried back two years and carried forward twenty years without a taxable income limitation as opposed to carried forward indefinitely, and (iii) made modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years. With respect to the technical correction to net operating losses, the Company recorded a discrete income tax provision of $4,275 during the three months ended May 31, 2020, as its valuation allowance related to net operating losses with limited carryforward periods increased.

For the three months ended May 31, 2021, the Company recorded an income tax provision of $484, which includes a discrete income tax benefit of $74 related primarily to the reversal of uncertain tax position liabilities as a result of the lapse of the applicable statute of limitations. For the three months ended May 31, 2020, the Company recorded an income tax provision of $1,781, which includes a discrete income tax provision of $4,292. The Company recorded a discrete tax provision of $4,275 related to an increase in valuation allowance as a result of the technical correction to net operating losses as provided in the CARES Act and a discrete tax provision of $17 related to the accrual of interest for unrecognized tax benefits.

The effective tax rates for the three months ended May 31, 2021 and 2020 were an income tax provision of 21.2% on pre-tax income of $2,281 and an income tax provision of 24.3% on pre-tax loss of $7,324, respectively. The effective tax rate for the three months ended May 31, 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, and 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 May 31, 2020 differed from the statutory rate of 21% primarily due to the immediate U.S. taxation of foreign earnings, nondeductible permanent differences, non-controlling interest related to EyeLock LLC, state and local income taxes, and income taxed in foreign jurisdictions at varying tax rates.

At May 31, 2021, the Company had an uncertain tax position liability of $1,079, including interest and penalties. The unrecognized tax benefits include amounts related to various U.S. federal, state, and local, and foreign tax issues.