Income Taxes Income Taxes

6 Months Ended

Apr. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Income Taxes

The provision for income taxes for the three months ended April 30,2019 was an expense of $1,448 on income before taxes of $2,560 for a consolidated effective tax rate of 56.6%. The provision for income taxes for the six months ended April 30,2019 was a benefit of $1,639 on loss before income taxes of $5,225 for a consolidated effective tax rate of 31.4%. The year-to-date benefit was calculated using the year-to-date loss, considering non-taxable and non-deductible items expected to be incurred for the full year multiplied by the statutory rate. This methodology is required by ASC 740, Income Taxes, as the use of an estimated annual effective rate would not be reliable.

The provision for income taxes for the three months ended April 30,2018 was an expense of $218 on income before income taxes of $4,243 for a consolidated effective tax rate of 5.1%. The provision for income taxes for the six months ended April 30,2018 was $2,840 on income before taxes of $6,043 for a consolidated effective tax rate of 47.0%.

The U.S. Internal Revenue Service has proposed disallowances of the majority of fiscal year 2012 and fiscal year 2013 U.S. R&D credits claimed. We are disputing this tax credit matter and intend to vigorously defend our position. We believe the ultimate resolution of the matters will not materially impact our results of operations, financial position or cash flows. With any tax controversy and litigation, there is, however, a chance of unforeseen loss which due to the number of years involved could materially impact our results, financial position and cash flows. For open tax years through fiscal year 2019, the total amounts related to the unreserved portion of the tax contingency, inclusive of any related interest, amounts to approximately $8,500, of which the majority has been assessed by management as being remote as to the likelihood of ultimately resulting in a loss to the Company. We routinely assess tax matters as to the probability of incurring a loss and record our best estimate of the ultimate loss in situations where we assess the likelihood of an ultimate loss as probable.