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Income Taxes
9 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Management assesses all available positive and negative evidence to determine whether a valuation allowance is required for the existing deferred tax assets. A significant piece of new objective negative evidence evaluated during the quarter ended December 31, 2018 was the cumulative U.S. pretax loss incurred over the most recent three-year period. Such objective negative evidence limits the ability to consider other subjective evidence, such as projections for future taxable income.
On the basis of this evaluation, as of December 31, 2018, a valuation allowance of $7,573,000 was recorded to fully offset our U.S. net deferred tax assets, as they more likely than not will not be realized.
The Company recognizes the impact of an uncertain tax position if it is more likely than not that such position will be sustained on audit, based solely on the technical merits of the position.
The income tax provision for interim periods is comprised of tax on ordinary income (loss) provided at the most recent estimated annual effective tax rate, adjusted for the tax effect of discrete items. Management estimates the annual effective tax rate quarterly based on the forecasted pretax income (loss) results of its U.S. and non-U.S. jurisdictions. Items unrelated to current year ordinary income (loss) are recognized entirely in the period identified as a discrete item of tax. These discrete items generally relate to changes in tax laws, adjustments to the actual liability determined upon filing tax returns, and adjustments to previously recorded reserves for uncertain tax positions.
New tax legislation in the U.S., commonly referred to as the Tax Cuts and Jobs Act, was enacted on December 22, 2017 (the "Tax Act"). The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on previously unremitted foreign earnings, allowed for immediate expensing of qualified property, and provided for the taxation of global intangible low-taxed income ("GILTI"), among other provisions.
Accounting Standards Codification 740, "Accounting for Income Taxes" ("ASC 740") requires companies to recognize the effect of tax law changes in the period of enactment. Though certain key aspects of the new law were effective January 1, 2018 and had an immediate accounting effect in fiscal 2018, other significant provisions were not effective or did not begin to result in accounting effects for the Company until April 1, 2018.
Given the significance of the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin 118, "Income Tax Accounting Implications of the Tax Cuts and Jobs Act" ("SAB 118"), which allows registrants to record provisional amounts during a one-year "measurement period" similar to that used when accounting for business combinations. During the measurement period, impacts of the Tax Act were recorded at the time a reasonable estimate for all or a portion of the effects were made, and provisional amounts were recognized and adjusted as information became available. In the current period, the Company finalized its provisional income tax adjustments previously recorded related to the Tax Act, primarily related to the effect of the one-time mandatory transition tax on the net accumulated earnings and profits of our foreign subsidiaries. The Company previously recorded a liability of $2,866,000 for the transition tax. In the current period, in conjunction with filing its fiscal 2018 U.S. consolidated federal income tax return, the Company elected to offset the net accumulated earnings and profits subject to the transition tax with other taxable losses incurred during fiscal 2018. The net effect of this election eliminated the $2,866,000 transition tax liability, but correspondingly reduced the amount of taxable losses available for carryforward to future years.
Also, with respect to the GILTI provision of the Tax Act, the Company has elected a policy to account for GILTI as a period cost if and when incurred.