INCOME TAXES |
3 Months Ended |
|---|---|
Apr. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES Our interim provision for income taxes is measured using an estimated annual effective income tax rate, adjusted for discrete items that occur within the periods presented. For the three months ended April 30, 2025, we recorded an income tax provision of $2.6 million on pretax income of $4.5 million, which represented an effective income tax rate of 57.5%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities and the income tax impacts of stock-based compensation, offset by the benefit of certain domestic tax credits and lower statutory rates in certain foreign jurisdictions. For the three months ended April 30, 2024, we recorded an income tax provision of $8.0 million on pretax income of $23.3 million, which represented an effective income tax rate of 34.1%. The effective tax rate differs from the U.S. federal statutory rate of 21% primarily due to the U.S. taxation of certain foreign activities, offset by lower statutory rates in certain foreign jurisdictions. We evaluate the realizability of deferred income tax assets on a jurisdictional basis at each reporting date. A valuation allowance is established when it is more-likely-than-not that all or a portion of the deferred income tax assets will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred income tax assets are not more-likely-than-not realizable, we establish a valuation allowance. We determined that there is sufficient negative evidence to maintain the valuation allowances against certain state and foreign deferred income tax assets as a result of historical losses in the most recent three-year period in certain state and foreign jurisdictions. We intend to maintain valuation allowances until sufficient positive evidence exists to support a reversal. We had unrecognized income tax benefits of $75.5 million and $75.9 million (excluding interest and penalties) as of April 30, 2025 and January 31, 2025, respectively, that if recognized, would impact our effective income tax rate. The accrued liability for interest and penalties was $9.0 million and $8.9 million at April 30, 2025 and January 31, 2025, respectively. Interest and penalties are recorded as a component of the provision for income taxes in our condensed consolidated statements of operations. We regularly assess the adequacy of our provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. As a result, we may adjust the reserves for unrecognized income tax benefits for the impact of new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitation. Our income tax returns are subject to ongoing tax examinations in several jurisdictions in which we operate. We also believe that it is reasonably possible that new issues may be raised by tax authorities or developments in tax audits may occur, which would require increases or decreases to the balance of reserves for unrecognized income tax benefits; however, an estimate of such changes cannot reasonably be made. The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the global economy, re-allocating taxing rights among countries. The European Union and many other member states have committed to adopting Pillar 2 which calls for a global minimum tax of 15% to be effective for tax years beginning in 2024. Certain jurisdictions in which we operate have enacted Pillar 2 legislation and others are considering changes to their tax laws to adopt the Pillar 2 proposals. We continue to monitor developments and evaluate the impacts of new rules as they are published, including eligibility to qualify for safe harbor rules. Pillar 2 did not have a material impact on our income tax expense for the three months ended April 30, 2025 and 2024.
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