TAXES

3 Months Ended

Jun. 30, 2022

TAXES

TAXES

NOTE 5. TAXES

For the three months ended June 30, 2022, the Company’s effective tax rate was (22.1%), compared to (24.3%) for the three months ended June 30, 2021. The Company’s negative effective tax rates in 2022 and 2021 reflect a tax expense on a pretax book loss in both periods. For the period ended June 30, 2022, income taxes are computed using the estimated annual effective tax rate applicable to the fiscal year ending March 31, 2023. For the period ended June 30, 2021, income taxes have been calculated as if Kyndryl had filed income tax returns on a standalone basis, as our operations were historically included in certain tax returns filed by IBM.

The Company’s effective tax rate for the three months ended June 30, 2022, was lower than the Company’s statutory tax rate primarily due to taxes on foreign operations and the increase in valuation allowances in certain jurisdictions against deferred tax assets that are not more likely than not to be realized. For the period ended June 30, 2022, the additions to valuation allowance primarily relate to a partial valuation allowance established against certain deferred tax assets in the United States.

The Company’s effective tax rate for the three months ended June 30, 2021, was lower than the Company’s statutory tax rate primarily due to the geographic mix of pretax income and changes in valuation allowances.