|12 Months Ended|
Apr. 30, 2022
|Income Tax Disclosure [Abstract]|
9. Income Taxes
Income from continuing operations before provision for income taxes was as follows:
The provision for domestic and foreign income taxes was as follows:
The reconciliation of the statutory federal income tax rate to the effective consolidated tax rate is as follows:
Components of deferred tax assets and liabilities were as follows:
Deferred tax assets are reduced by a valuation allowance if it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Management believes uncertainty exists regarding the realizability of certain deferred tax assets and has, therefore, established a valuation allowance offsetting deferred tax assets that are not more-likely-than-not to be realized. Realization of the deferred tax asset is dependent on the Company generating enough taxable income of the appropriate nature in future years. Although realization is not assured, management believes that it is more likely than-not that the net deferred tax assets will be realized. In fiscal 2022, the Company’s valuation allowance decreased by $1.1 million primarily due to the reversal of valuation allowance previously recorded against deferred tax assets, including net operating losses, of certain foreign subsidiaries that had returned to profitability and were now more-likely-than-not to realize those deferred tax assets. In fiscal 2021 and 2020, the Company’s valuation allowance increased by $7.3 million and $3.8 million, respectively, primarily due to increases in net operating losses in certain foreign jurisdictions that were not more-likely-than-not to be realized. Deferred tax assets and deferred tax liabilities are presented net on the consolidated balance sheets by tax jurisdiction.
As of April 30, 2022, the Company had U.S. federal net operating loss carryforwards of $14.6 million, which if unutilized, will begin to expire in fiscal 2030. The Company has state net operating loss carryforwards of $34.2 million, which, if unutilized, will begin to expire in fiscal 2023. The Company also has foreign net operating loss carryforwards of $112.5 million, which, if unutilized, will begin to expire in fiscal 2023.
We continue to consider approximately $662.1 million of undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, have provided no state, local or foreign withholding income taxes on such
earnings. While we do not anticipate a need to repatriate funds to the U.S. to satisfy domestic liquidity needs, we review our cash positions regularly and, to the extent we determine that all or a portion of our foreign earnings are not indefinitely reinvested, we provide additional state, local and foreign withholding income taxes. Under current U.S. federal tax law, we do not expect to incur a U.S. federal income tax liability on the undistributed earnings in the event they are repatriated to the United States.
The Company elected to treat taxes due on future U.S. inclusions in taxable income related to Global Intangible Low-Taxed Income as an expense when incurred (the “period cost method”) as opposed to factoring such amounts in the Company’s measurement of its deferred taxes (the “deferred method”).
The Company and its subsidiaries file federal and state income tax returns in the U.S. as well as in foreign jurisdictions. These income tax returns are subject to audit by the Internal Revenue Service (the “IRS”) and various state and foreign tax authorities. Currently, income tax returns of the Company’s subsidiaries are under audit in Brazil, Germany, Switzerland, Japan, and India. The Company’s income tax returns are not otherwise under examination in any material jurisdictions. The statute of limitations varies by jurisdiction in which the Company operates. With few exceptions, however, the Company’s tax returns for years prior to fiscal 2016 are no longer open to examination by tax authorities (including U.S. federal, state and foreign).
Unrecognized tax benefits are the differences between the amount of benefits of tax positions taken, or expected to be taken, on a tax return and the amount of benefits recognized for financial reporting purposes. As of April 30, 2022, the Company had a liability of $10.7 million for unrecognized tax benefits. A reconciliation of the beginning and ending balances of the unrecognized tax benefits is as follows:
The full amount of unrecognized tax benefits would impact the effective tax rate if recognized. In the next 12 months, it is reasonably possible that the Company’s unrecognized tax benefits could change due to the resolution of certain tax matters either because the tax positions are sustained on audit or the Company agrees to their disallowance. These resolutions could reduce the Company’s liability for unrecognized tax benefits by approximately $2.9 million.
The Company classifies interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The Company had accruals of $1.4 million, $0.9 million, and $0.6 million for interest related to unrecognized tax benefits as of April 30, 2022, 2021, and 2020 respectively. The Company had an accrual of $0.5 million and $0.5 million as of April 30, 2022 and 2021, respectively, for penalties related to unrecognized tax benefits. The Company recognized tax expense of $0.4 million, $0.8 million, and $0.2 million for interest and penalties related to unrecognized tax benefits during fiscal 2022, 2021, and 2020, respectively.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef