Income Taxes

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

The provision for (benefit of) income taxes consists of the following components:

	Fiscal Year Ended March 31,
	2022			2021			2020
Current:
Federal taxes	$	1,090		$	6,562		$	408
State taxes		1,081			1,226			858
Foreign taxes		1,192			826			874
Total current taxes		3,363			8,614			2,140
Deferred:
Federal taxes	$	43		$	(6,053	)	$	(3,578	)
State taxes		(379	)		(2,068	)		(1,682	)
Foreign taxes		551			(733	)		(119	)
Total deferred taxes		215			(8,854	)		(5,379	)
Provision for (benefit of) income taxes	$	3,578		$	(240	)	$	(3,239	)

The provision for (benefit of) income taxes differs from the amount computed at the federal statutory rate as follows:

	Fiscal Year Ended March 31,
	2022			2021			2020
Tax expense at United States federal statutory rate (1)	$	1,091		$	1,948		$	895
Items affecting federal income tax rate:
Executive compensation limitation		2,068			775			260
Impact of uncertain tax positions		1,620			278			1,062
Share-based compensation		1,059			865			125
State income taxes		950			572			687
Impact of foreign operations		356			(1,203	)		(683	)
Impact of amended returns		163			(9	)		67
Impact of deferred adjustments		88			(251	)		159
Impact of audit settlements		—			(56	)		(61	)
Acquisition expenses		—			—			229
Non-deductible expenses		(27	)		(258	)		643
Return to provision true-ups		(152	)		(15	)		(1,868	)
Impact of valuation allowance		(882	)		563			(49	)
Research and development tax credits		(2,756	)		(3,449	)		(4,705	)
Provision for (benefit of) income taxes	$	3,578		$	(240	)	$	(3,239	)

^{(1) Federal statutory rate was 21.0% for March 31, 2022, 2021 and 2020.}

The net deferred tax assets and liabilities in the accompanying consolidated balance sheets consist of the following:

	March 31, 2022			March 31, 2021
Deferred tax assets:
Compensation and benefits	$	17,494		$	19,541
Deferred revenue		9,245			8,325
Research and development credit		7,165			7,706
Net operating losses		6,018			7,652
Operating lease liabilities		3,774			6,204
Foreign deferred taxes		1,755			2,306
Allowance for credit losses		1,658			1,819
Accounts receivable		511			—
Accrued legal settlement		—			905
Total deferred tax assets		47,620			54,458
Deferred tax liabilities:
Prepaid expense	$	(10,895	)	$	(9,396	)
Intangibles assets		(8,703	)		(9,451	)
Operating right-of-use assets		(1,713	)		(3,003	)
Capitalized software		(647	)		(4,659	)
Accelerated depreciation		(640	)		(1,339	)
Other		(630	)		(611	)
Accounts receivable		—			(510	)
Total deferred tax liabilities		(23,228	)		(28,969	)
Valuation allowance		(5,133	)		(6,015	)
Deferred tax assets, net	$	19,259		$	19,474

The deferred tax assets and liabilities have been shown net in the accompanying consolidated balance sheets as noncurrent.

As of March 31, 2022 and 2021, we had federal net operating loss (“NOL”) carryforwards of $10,801 and $18,748, respectively. The federal NOL carryforwards were inherited in connection with our acquisitions of HealthFusion in January 2016, Gennius in March 2015, Entrada in April 2017, EagleDream in August 2017, and Medfusion in December 2019. The NOL carryforwards expire in various amounts starting in fiscal 2030 for both federal and state tax purposes. As of March 31, 2022, we had state NOL carryforwards of approximately $3,750 (tax effected), related to the HealthFusion, Entrada, EagleDream, and Medfusion acquisitions. The utilization of the federal NOL carryforwards is subject to limitations under the rules regarding changes in stock ownership as determined by the Internal Revenue Code.

As of March 31, 2022 and 2021, the research and development tax credit carryforward available to offset future federal and state taxes was $8,155 and $8,574, respectively. The federal credits include credits inherited in connection with our acquisition of Medfusion in December 2019. The credits expire in various amounts starting in fiscal 2034.

We expect to receive the full benefit of the deferred tax assets recorded with the exception of certain foreign and state credits and state NOL carryforwards for which we have recorded a valuation allowance.

Notwithstanding the U.S. taxation of the deemed repatriated foreign earnings as a result of the one-time Transition Tax, we intend to continue investing these earnings indefinitely outside of the U.S. If we determine that all or a portion of our foreign earnings are no longer to be indefinitely reinvested, we may be subject to additional foreign withholding taxes and state income taxes in the U.S. beyond the Tax Reform’s one-time Transition Tax. In the event that we distribute the foreign earnings to the U.S., we will incur and record foreign withholding related taxes and U.S. state taxes of approximately $4,217 and $714, respectively.

The Taxation Laws (Amendment) Act, 2019 was enacted on December 12, 2019 to lower corporate tax rates in India. We opted not to elect for the reduced tax rate for various factors for the year ended March 31, 2022 and 2021. 

Uncertain tax positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is recorded within other noncurrent liabilities and deferred income taxes, net in our consolidated balance sheet, is as follows:

Balance as of March 31, 2020	$	4,192
Additions for prior year tax positions		220
Additions for current year tax positions		635
Reductions for prior year tax positions		(621	)
Balance as of March 31, 2021		4,426
Additions for prior year tax positions		1,184
Additions for current year tax positions		763
Reductions for prior year tax positions		(261	)
Balance as of March 31, 2022	$	6,112

During the year ended March 31, 2022, we recorded additional net liabilities of $1,686 related to various federal, foreign, and state tax planning benefits recorded in the current year for current and prior year tax positions. If recognized, the total amount of unrecognized tax benefit that would decrease the income tax provision is $6,112.

Our practice is to recognize interest related to income tax matters as interest expense in the consolidated statements of net income and comprehensive income. We had approximately $286 and $88 of accrued interest related to income tax matters as of March 31, 2022 and 2021, respectively. We recognized interest expense of $199, interest income of $85, and interest income of $35 in the years ended March 31, 2022, 2021 and 2020, respectively, related to income tax matters in the consolidated statements of net income and comprehensive income. No penalties related to income tax matters were accrued or recognized in our consolidated financial statements for all periods presented.

We are subject to taxation in federal, various state, Indian, and United Kingdom jurisdictions. We are no longer subject to U.S. federal income tax examinations or other foreign tax authorities for tax years before fiscal year ended 2018. With a few exceptions, we are no longer subject to state or local income tax examinations for tax years before fiscal year ended 2017. We do not anticipate that total unrecognized tax benefits will significantly change due to the settlement of audits or the expiration of statute of limitations within the next twelve months.