Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
18. INCOME TAXES The components of Income before income taxes for the fiscal years ended March 31 are as follows:
The components of Income tax expense for the fiscal years ended March 31 consisted of the following:
For the fiscal years ended March 31, the effective tax rate varied from the statutory Federal income tax rate as a result of the following factors:
As discussed in “Note 4. Acquisitions”, the Company acquired Infiltrator on July 31, 2019. During the year ended March 31, 2020, as part of the purchase price, approximately $132.4 million was attributed to deferred tax liabilities. Of the $132.4 million, $82.3 million related to the step up of GAAP basis for fair market valuations, while the remaining $50.1 million were acquired deferred tax liabilities. Of the total $82.3 million, $80.2 million was attributed to intangibles. The Company also acquired a federal net operating loss of $24.0 million. As of March 31, 2021, the Company plans to repatriate earnings from Canada and believes that there will be no additional tax costs associated with the repatriation of such earnings other than any potential non-U.S. withholding taxes. No deferred tax liability has been recognized as of March 31, 2021. The Company has approximately $21.0 million of undistributed earnings from other foreign entities that are intended to be reinvested indefinitely with the exception of cash dividends paid by the Company’s ADS Mexicana joint venture. It is not practicable to estimate the amount of U.S. tax, which would primarily relate to withholding tax, that might be payable on the eventual remittance of such undistributed earnings. The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31 were comprised of:
Net deferred tax assets and liabilities are included in Other assets and Deferred tax liabilities, respectively, on the Consolidated Balance Sheets. The related balances at March 31 were as follows:
As a result of the acquisition of Infiltrator, the Company acquired state net operating losses (“NOLs”) and state credit carryforward attributes. The Company has recorded deferred tax assets related to state NOLs of $0.9 million as of March 31, 2020, with carryforward periods ranging from 5 to 20 years. Any losses not utilized within a specific state’s carryforward period will expire. A valuation allowance has been recorded against $0.1 million of these deferred tax assets as of March 31, 2020 for state NOLs that the Company does not expect to realize within their respective carryforward periods. The Company has no deferred tax assets and valuation allowances related to state NOLs as of March 31, 2021. Tax benefits associated with state tax credits will also expire if not utilized and amounted to $0.9 million and $0.8 million at March 31, 2021 and 2020, respectively. A valuation allowance in the amount of $0.3 million and $0.5 million has been established related to state credits the Company does not expect to utilize as of March 31, 2021 and 2020, respectively.
Deferred tax assets related to foreign NOLs were $0.1 million and $0.3 million as of March 31, 2021 and 2020, respectively, with carryforward periods ranging from 20 years to indefinite carryforward periods. Any losses not utilized within a specific carryforward period will expire. A valuation allowance has been recorded against $0.1 million of these deferred tax assets as of March 31, 2021 and 2020 for foreign NOLs that the Company does not expect to realize within their respective carryforward periods. Accounting for Uncertain Tax Positions As of March 31, 2021, The Company had unrecognized tax benefit of $1.7 million, which if resolved favorably, would reduce income tax expense by $1.7 million. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended March 31 is as follows:
The short-term portion of the unrecognized tax benefit of $0.3 million at March 31, 2021 is recorded in Other accrued liabilities on the Company’s Consolidated Balance Sheet. The long-term portion of unrecognized tax benefits are recorded in Other liabilities in the Company’s Consolidated Balance Sheets. These amounts include potential accrued interest and penalties of $0.5 million and $0.8 million at March 31, 2021 and 2020, respectively. The Company believes that over the next twelve months, it is reasonably possible that up to $0.3 million of unrecognized tax benefits could be resolved as the result of settlements of audits and the expiration of statutes of limitation. Final settlement of these issues may result in payments that are more or less than this amount, but the Company does not anticipate that the resolution of these matters will result in a material change to its consolidated financial position or results of operations. The Company is currently open to audit under the statute of limitations by the IRS for the fiscal years ended March 31, 2018 through March 31, 2021. The majority of the Company’s state income tax returns are open to audit under the statute of limitations for the years ended March 31, 2017 through March 31, 2021. The foreign income tax returns are open to audit under the statute of limitations for the years ended March 31, 2017 through March 31, 2021. |