NOTE 12 – INCOME TAXES

The following is a summary of income before income taxes for Fiscal 2026, Fiscal 2025 and Fiscal 2024:

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The components of the provision for income taxes for Fiscal 2026, Fiscal 2025 and Fiscal 2024 are presented below:

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The amounts of interest and penalties related to income taxes that were incurred by the Company during Fiscal 2026, Fiscal 2025, and Fiscal 2024 were not material.

The Company adopted ASU 2023-09 on a prospective basis beginning with the year ended January 31, 2026. The following table reconciles the amount of income taxes computed by applying the 21% statutory U.S. federal income tax rate to the consolidated amount of income before income taxes to the Company’s provision for income taxes presented in the consolidated statements of earnings in accordance with ASU 2023-09 for Fiscal 2026:

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The following table presents the required disclosures prior to the Company’s adoption of ASU 2023-09 and reconciles the amount of income tax computed by applying the 21% statutory U.S. federal income tax rate to the consolidated amounts of income before income taxes to the Company’s provision for income taxes for Fiscal 2025 and Fiscal 2024:

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On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law. The legislation includes several changes to U.S. federal income tax law that generally allow for more favorable deductibility of certain business expenses beginning in calendar year 2025, including the restoration of immediate expensing for domestic research and development expenditures and the reinstatement of 100% bonus depreciation for qualified property. The OBBBA also includes certain modifications to the U.S. taxation of foreign activity, including changes to rules governing foreign tax credits, Global Intangible Low-Taxed Income (“GILTI”), Foreign-Derived Intangible Income (“FDII”), and the Base Erosion and Anti-Abuse Tax (“BEAT”), among other changes. Most of these modifications to the U.S. taxation of foreign activity are generally effective for tax years beginning after December 31, 2025.

Certain benefits from the OBBBA, such as deducting previously capitalized domestic research and development expenditures, were included in the provision for income taxes for Fiscal 2026. The impacts of these benefits were not material to the provision for income taxes for Fiscal 2026.

Net Operating Loss (“NOL”) Carryback    

The tax changes enacted by the Coronavirus, Aid, Relief and Economic Security Act signed into law in March 2020 (the “CARES Act”) included re-establishing a carryback period for certain losses to five years. The NOLs eligible for carryback under the CARES Act included the Company’s domestic loss for the year ended January 31, 2020 (“Fiscal 2020”). In accordance with the provisions of the CARES Act, the Company filed for income tax refunds totaling approximately $12.7 million during the year ended January 31, 2021 (“Fiscal 2021”), for taxes paid in prior years. These amounts are included in income tax refunds receivable along with related accrued interest.

The refund claims were primarily attributable to a bad debt deduction recorded during Fiscal 2020. This deduction was selected for examination by the Internal Revenue Service (“IRS”). In January 2026, the IRS concluded its examination and proposed no changes to the Company’s Fiscal 2020 federal income tax return.

Research and Development Tax Credits

During the year ended January 31, 2023 (“Fiscal 2023”), the Company filed amended federal income tax returns for the year ended January 31, 2022 (“Fiscal 2022”) and Fiscal 2021 that included previously unclaimed research and development tax credits in the total amount of $5.8 million, the benefit of which was recorded net of a provision for uncertain tax return

positions in the amount of $2.4 million. In May 2023, the Company received notification that these amended federal income tax returns were selected for examination. In July 2025, the IRS concluded its examination of the Company’s amended federal income tax returns for Fiscal 2022 and Fiscal 2021 and issued its final revenue agents report that disallowed in full the research and development tax credits claimed by the Company for those periods. In August 2025, the Company began the formal process of challenging the IRS’s findings. The Company intends to contest the disallowance and believes it has substantial authority supporting its position. In addition, soon after the IRS issued its final revenue agents report in July 2025, the Company filed a notice of claim under its corresponding tax liability insurance policy.

The Company has also formally protested the conclusions of a state tax authority that disallowed certain research and development credits claimed on the Company’s tax returns.

Unrecognized Income Tax Benefits

Changes in the balances of the contra-asset established for uncertain income tax positions during Fiscal 2026, Fiscal 2025 and Fiscal 2024 are presented below:

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Gross unrecognized income tax benefits totaled $2.5 million for Fiscal 2026, all of which would affect the Company’s effective income tax rate favorably if recognized.

Recognition of Foreign NOL Income Tax Benefits

As of January 31, 2026, the Company has deferred tax assets in a total amount of approximately $13.7 million related to NOLs of its foreign subsidiaries, primarily the operations of the U.K. subsidiary. Prior to Fiscal 2024, the Company had reserved a portion of the deferred tax assets related to these NOLs. In Fiscal 2024, the unexpected difficulties with an overseas project and the related loss that was incurred by the Company’s U.K. subsidiary caused management to increase the allowance by $2.1 million in Fiscal 2024. During Fiscal 2025, the valuation allowance was increased by $1.4 million related to additional operating losses incurred by the U.K subsidiary during the fiscal year. As of January 31, 2026, the deferred tax assets associated with NOLs of the Company’s U.K. subsidiary remain fully offset by a valuation allowance.

Deferred Taxes

The tax effects of temporary differences that are reflected in deferred taxes as of January 31, 2026 and 2025 included the following:

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In a prior fiscal year, the Company acquired unused NOLs for federal income tax reporting purposes that are subject to limitations imposed by Section 382 of the Internal Revenue Code of 1986, as amended. These losses are subject to annual limits that reduce the aggregate amount of NOLs available to the Company in the future to approximately $5.5 million. These NOLs are available to offset future taxable income and, if not utilized, begin expiring during 2032. The NOL carryforwards related to the Company’s U.K subsidiary do not expire. The Company also has certain NOLs that will be available to the Company for state income tax reporting purposes that are substantially similar to the federal NOLs.

The Company’s ability to realize deferred tax assets, including those related to the NOLs discussed above, depends primarily upon the generation of sufficient future taxable income to allow for the Company’s use of temporarily deferred deductions and tax planning strategies. If such estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against some or all its deferred tax assets resulting in additional income tax expense. At this time, management believes that it is more likely than not that the Company will realize the benefit of significantly all its deferred tax assets, net of valuation allowances.

Cash Income Taxes Paid

The Company adopted ASU 2023-09 on a prospective basis beginning with the year ended January 31, 2026. The following table presents income taxes paid (net of refunds received) for Fiscal 2026 in accordance with the new standard:

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The amounts of cash paid for income taxes, net of refunds received, were $30.8 million and $14.3 million for Fiscal 2025 and Fiscal 2024, respectively.

Income Tax Refunds

As of January 31, 2026 and 2025, the balances of other current assets in the consolidated balance sheets included income tax refunds receivable related accrued interest, and prepaid income taxes in the total amounts of approximately $36.0 million and $30.9 million, respectively. The income tax refunds receivable include the Company’s NOL carryback refund as described above.

Income Tax Returns

The Company is subject to federal and state income taxes in the U.S., and income taxes in Ireland and the U.K. Tax treatments within each jurisdiction are subject to the interpretation of the related tax laws and regulations which require significant judgments to apply. The Company is no longer subject to income tax examinations by authorities for its fiscal years ended on or before January 31, 2022, except for several notable exceptions including Ireland, the U.K. and several states where the open periods are one year longer.

Solar Energy Projects

During Fiscal 2026, Fiscal 2025, and Fiscal 2024 the Company made cash investments of approximately $11.5 million, $16.3 million, and $5.1 million in STC investments, respectively, which are included in cash paid for income taxes. As of January 31, 2026, the Company had no remaining cash investment commitments related to its STC investments. As of January 31, 2026 and 2025, the investment account balances were $1.7 million and $4.6 million, respectively, which are included in other assets in the consolidated balance sheets. These investments are expected to provide positive overall returns over their expected lives.

The Company has STC investments that qualify for PAM. For these investments, the Company recognized $3.0 million, $24.2 million, and $8.1 million of income tax credits and other income tax benefits in Fiscal 2026, Fiscal 2025, and Fiscal 2024, respectively. The Company recorded amortization related to these STC investments of $2.8 million, $22.3 million, and $7.4 million during Fiscal 2026, Fiscal 2025, and Fiscal 2024, respectively. The amounts of non-income tax related activity and other returns related to the STC investments that qualify for PAM were not material for Fiscal 2026, Fiscal 2025, and Fiscal 2024.

For the Company’s STC investments that do not qualify for PAM, no income tax credits were recognized in Fiscal 2026, Fiscal 2025 and Fiscal 2024, and the Company’s share of activity from these STC investments for the respective fiscal years was not material.