Entity information:

• Entity registrant name: VEEVA SYSTEMS INC
• CIK: 0001393052
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1393052/000156459018007164/0001564590-18-007164-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1393052/000156459018007164/veev-20180131.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1393052/000156459018007164/veev-20180131.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001393052
• Generator: Donnelley Financial Solutions
• Total assets: 1,197,008,000
• Income tax expense (benefit): 16,668,000
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

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Note 8. Income Taxes

The components of income before income taxes by U.S. and foreign jurisdictions were as follows for the periods shown (in thousands):

 

 

The majority of our revenues from international sales are invoiced from and collected by our U.S. entity and recognized as a component of income before taxes in the United States as opposed to a foreign jurisdiction.

Provision for income taxes consisted of the following for the periods shown (in thousands):

 

 

Provision for income taxes differed from the amount computed by applying the federal statutory income tax rate of 33.8%, to income before income taxes as a result of the following for the periods shown (in thousands):

 

 

The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and liabilities related to the following (in thousands):

 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result, a valuation allowance was assessed as it is not more likely than not that we will recognize the future benefits on certain net California deferred tax asset balances.

As of January 31, 2018, we did not have any net operating loss carryforwards for federal income tax purposes. As of January 31, 2018, the net operating loss carryforwards for state income tax purposes were approximately $4.1 million. The federal net operating losses and the state net operating losses begin to expire in 2033.

As of January 31, 2018, we had $15.9 million of California research and development tax credits available to offset future taxes, which do not expire.

We evaluate tax positions for recognition using a more-likely than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.

On December 22, 2017, the Tax Act was enacted into law and amended certain provisions of the Internal Revenue Code of 1986 (IRC). Amendments to the IRC, include, among others, a reduction of the corporate income tax rate from 35% to 21% effective January 1, 2018, a transition tax on accumulated foreign earnings (transition tax), the shift from a worldwide to a territorial tax regime, and a limitation on the deductibility of executive compensation under IRC Section 162(m). Account Standards Codification (ASC) 740, “Income Taxes” (Topic 740), requires us to recognize the effect of the Tax Act in the period of enactment, such as remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities.

 

 

However, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows companies the ability to record provisional amounts during a measurement period not to extend more than one year beyond the Tax Act enactment date. Since the Tax Act was passed late in 2017 and further guidance and accounting interpretations are expected over the next 12 months, our provisional estimate on the effect of the Tax Act in our financial statements remains subject to change. We have considered the impact of the transition tax, and we expect to complete our analysis within the measurement period in accordance with SAB 118.

For the year ended January 31, 2018, the Company recognized provisional effects from the Tax Act, which include the remeasurement of the U.S. deferred tax assets and liabilities, application of the I.R.C. Section 162(m) provision and the transition tax. The effects of the 2017 Act had an immaterial impact on the Company’s financial statements for the current year.  The Company will continue to evaluate the impact based on future guidance from the Internal Revenue Service.

We classify unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as “other non-current liabilities” in the consolidated balance sheets. As of January 31, 2018, the total amount of gross unrecognized tax benefits was $11.4 million, of which $5.9 million, if recognized, would favorably impact our effective tax rate. The aggregate changes in our total gross amount of unrecognized tax benefits are summarized as follows for the periods shown (in thousands):

 

 

Our policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. Interest and penalties were not significant during fiscal year ended January 31, 2018.

We file tax returns in the United States for federal, California, and other states. Fiscal years ended January 31, 2015 and forward remain open to examination for federal income tax, and fiscal years ended January 31, 2014 and forward remain open to examination for California and other states. We file tax returns in multiple foreign jurisdictions. The fiscal years ended January 31, 2013 and forward remain open to examination in these foreign jurisdictions.

As of January 31, 2018, we had not made any tax provision for U.S. federal and state income taxes and foreign withholding taxes on an immaterial amount of undistributed cumulative earnings of foreign subsidiaries that would be potentially subject to taxes upon repatriation, because those earnings are considered to be indefinitely reinvested in those operations. If we were to repatriate these earnings to the United States, we would be subject to particular jurisdictional taxes.