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Income Taxes
 12 Months Ended
Jan. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the net income before the (benefit from) provision for income taxes were as follows:
 Year Ended January 31,
 202220212020
 (in thousands)
Domestic$1,047,318 $663,909 $16,268 
Foreign54,314 14,125 10,094 
Total$1,101,632 $678,034 $26,362 
The (benefit from) provision for income taxes was as follows:
 Year Ended January 31,
 202220212020
 (in thousands)
Current:
Federal$69,853 $— $— 
State20,174 1,023 14 
Foreign12,027 3,933 2,226 
Total current income tax expense102,054 4,956 2,240 
Deferred:
Federal(293,704)689 — 
State(82,561)248 — 
Foreign204 (175)(1,183)
Total deferred income tax expense(376,061)762 (1,183)
Total (benefit from) provision for income taxes
$(274,007)$5,718 $1,057 
The (benefit from) provision for income taxes differs from the amount computed by applying the statutory federal tax rate as follows:
 Year Ended January 31,
 202220212020
 (in thousands, except percentages)
Tax at federal statutory rate$231,350 $142,387 $5,536 
State taxes24,840 636 14 
Foreign rate differential1,830 89 (2,096)
Stock-based compensation(135,250)(302,362)(32,070)
Foreign-derived intangible income deduction(34,131)— — 
Permanent items3,971 2,228 1,009 
Research and development credits(42,973)(3,170)(2,808)
Tax uncertainties244 (607)1,019 
Change in valuation allowance(322,231)165,869 30,932 
Other(1,658)648 (479)
Total$(274,007)$5,718 $1,057 
Effective tax rate(24.9)%0.8 %4.0 %
Deferred income taxes result from differences in the recognition of amounts for tax and financial reporting purposes, as well as operating loss and tax credit carryforwards. Significant components of our deferred income tax assets as of January 31, 2022 and 2021 are as follows:
 
As of January 31,
 20222021
 (in thousands)
Deferred tax assets:
Net operating loss carryforwards$21,558 $341,487 
Research and development credit carryforwards9,985 12,191 
Stock-based compensation44,490 37,255 
Accruals and reserves14,475 29,195 
Deferred revenue260,322 6,565 
Capitalized research expenditures131,010 — 
Operating lease liabilities25,892 27,842 
Total deferred tax assets507,732 454,535 
Valuation allowance(12,605)(335,051)
Total deferred tax assets net of valuation allowance495,127 119,484 
Deferred tax liabilities:
Property and equipment and intangible assets(26,733)(17,229)
Deferred contract acquisition costs(62,814)(76,593)
Operating right-of-use assets(23,466)(25,550)
Total deferred tax liabilities(113,013)(119,372)
Net deferred tax assets$382,114 $112 

We review the likelihood that we will realize the benefit of our deferred tax assets and, therefore, the need for a valuation allowance on a quarterly basis. We have maintained a valuation allowance on all our U.S. and U.K. net deferred tax assets since our inception as it was determined that it was more likely than not that we would not recognize the benefits of these assets. We continued to record a valuation allowance through the first nine months of fiscal 2022. In the fourth quarter of fiscal 2022, management concluded that the valuation allowance related to the U.S. federal and state deferred tax assets was no longer needed primarily due to its assessment of income/loss in recent periods and the forecast of future taxable income. As of January 31, 2022, based on evaluation of all positive and negative evidence, management believes it is more likely than not that the net deferred tax assets will be realized for U.S. federal and state purposes. Accordingly, management has recognized a non-recurring tax benefit of $328.0 million related to the valuation allowance reversal. As of January 31, 2022, we continued to maintain a valuation allowance of $12.6 million related to net deferred tax assets of our U.K. subsidiary and will maintain this valuation allowance until there is sufficient evidence to support the reversal of all or a portion of the valuation allowance.
As of January 31, 2022, we had net operating loss carryforwards of approximately $122.3 million for state income tax purposes, which will begin to expire in the year 2033 if unused. We also had certain foreign net operating loss carryforwards of $44.2 million, which have an indefinite life.
As of January 31, 2022, we also had research and development credit carryforwards of approximately $18.4 million for state income tax purposes. The state research and development tax credits carry forward indefinitely.
The state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986 and similar provisions under state law. Such provisions limit the net operating loss carryforwards that may be used in any given year in the event of special occurrences, including significant ownership changes. We have completed a Section 382 review and determined that none of our operating losses will expire solely due to Section 382 limitation(s).
We indefinitely reinvest earnings from our foreign subsidiaries and therefore no deferred tax liability has been recognized on the basis difference created by such earnings. We have not provided foreign withholding taxes for any undistributed earnings of our foreign subsidiaries.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows:
Unrecognized Tax Benefits (in thousands)Year Ended January 31,
 202220212020
   
Balance, beginning of year$14,884 $8,106 $2,778 
Tax Positions taken in prior year:
Gross increases— 314 — 
Gross decreases(3,764)— — 
Tax Positions taken in current year:
Gross increases8,211 6,001 5,328 
Gross decreases— — — 
Lapse of Statute of Limitations(160)(422)— 
Acquisitions— 885 — 
Balance, end of year$19,171 $14,884 $8,106 
As of January 31, 2022, gross unrecognized tax benefits related to uncertain tax positions were $19.2 million ($19.6 million total, including $0.4 million associated with interest and penalties). As of January 31, 2021, gross unrecognized tax benefits related to uncertain tax positions were $14.9 million ($15.0 million total, including $0.1 million associated with interest and penalties). As of January 31, 2020, gross unrecognized tax benefits related to uncertain tax positions were $8.1 million ($8.4 million total, including $0.3 million associated with interest and penalties). We recognized approximately $0.4 million, $0.1 million, and $0.3 million in potential interest and penalties associated with uncertain tax positions during fiscal years ended January 31, 2022, 2021, and 2020, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision.
We file income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. As of January 31, 2022, all of the years remain open to examination by the federal and state tax authorities, for three or four years from the tax year in which net operating losses or tax credits are utilized. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. Although the timing of the resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months.
On March 11, 2021, the American Rescue Plan Act of 2021 (“American Rescue Plan Act”) was passed into law and amended portions of relevant tax laws. The American Rescue Plan Act did not have a significant impact on the provision for income taxes for the fiscal year ended January 31, 2022.