Income Taxes

6 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The provision for (benefits from) income taxes for the three and six months ended September 30, 2023 is based on our projected annual effective tax rate for fiscal year 2024, adjusted for specific items that are required to be recognized in the period in which they are incurred. Our effective tax rate for the three and six months ended September 30, 2023 was negative 2 percent and 15 percent, respectively, as compared to 30 and 29 percent for the same period in fiscal year 2023.

Our effective tax rate for the three months ended September 30, 2023 included a $92 million one-time tax benefit to remeasure our Swiss deferred tax assets to the higher statutory tax rate which was enacted during the three months ended September 30, 2023.

In addition, our effective tax rate for the three months ended September 30, 2023 included a cumulative one-time benefit related to R&D capitalization guidance issued by the U.S. Treasury during the three months ended September 30, 2023.

Excluding the one-time items in the current year period, the effective tax rate for the three and six months ended September 30, 2023 would have been 25 and 27 percent, respectively, and are lower than the effective tax rate in the prior year period primarily due to a lower period cost for U.S. tax on our non-U.S. earnings. Our projected period cost for the current year period was favorably impacted by the R&D capitalization guidance.

We are subject to income tax examinations in various jurisdictions with respect to fiscal years after 2013. The timing and potential resolution of income tax examinations is highly uncertain. The gross unrecognized tax benefits as of September 30, 2023 were $757 million, which was reduced by $185 million from the prior quarter, primarily due to the R&D capitalization guidance.

While we continue to measure our uncertain tax positions, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued. For example, in the period ended June 30, 2020, the decision of the Ninth Circuit Court of Appeals in Altera Corp. v Commissioner (“the Altera opinion”) resulted in a partial decrease of our unrecognized tax benefits. A complete resolution and settlement of the matters underlying the Altera opinion is reasonably possible within the next 12 months, which would result in an additional reduction of our gross unrecognized tax benefits. However, it is uncertain whether a complete resolution and settlement of such matters would also result in resolution of all related and unrelated U.S. positions for all applicable years. Therefore, it is not possible to provide a range of potential outcomes associated with a reversal of our gross unrecognized tax benefits. We expect changes in unrecognized tax benefits unrelated to the Altera opinion which may occur within the next twelve months to be insignificant.