Income Taxes

9 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes

The following table compares our income tax provision and effective tax rates for the three and nine months ended December 31, 2023 and 2022:

	Three months ended December 31,						Nine months ended December 31,
(Dollars in thousands)	2023			2022			2023			2022
Income tax (benefit) provision	$	(68,043	)	$	678		$	(67,396	)	$	920
Effective tax rate	nm				14.8	%	nm				8.1	%

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Since the end of fiscal 2009, we have recorded valuation allowances offsetting substantially all the Company’s deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. During the third quarter of fiscal 2024, we determined that it was more likely than not that the Company would be able to realize the benefit of substantially all of its deferred tax assets in the United States. In reaching this determination, we considered our growing trend of profitability over recent years, our expectations regarding the generation of future taxable income as well as the overall improvement in the Company’s business. As a result, during the three months ended December 31, 2023, the Company recognized a discrete tax benefit related to the release of approximately $65.1 million in valuation allowance against its deferred tax assets in the United States and Canada that are expected to be realized in future years, which caused our effective tax rate to differ from the statutory rate. At December 31, 2023, the Company continued to provide a valuation allowance of $2.8 million primarily against certain state and foreign net operating losses (“NOLs”).

For the three and nine months ended December 31, 2023, the Company recorded an income tax benefit of $68.0 million and $67.4 million, respectively. Excluding the release of $65.1 million in valuation allowance and the release of $1.0 million in uncertain tax positions and related accrued interest due to expiration of various US state statutes of limitations, the Company recorded income tax benefit of $5.6 million for tax windfalls from stock compensation, income tax benefit of $2.4 million for R&D credits and, for the three and nine months ended December 31, 2023, deferred income tax expense of $6.1 million and $6.7 million, respectively.

For the three and nine months ended December 31, 2022, the Company recorded income tax provision of $0.7 million and $0.9 million, respectively, primarily related to income tax in states where NOL usage is statutorily limited.

For the three and nine months ended December 31, 2022, the effective tax rate was different than the statutory rate due primarily to adjustments to deferred tax assets and to valuation allowances that reduce deferred tax assets and to the recording of net operating losses in several foreign jurisdictions offset by current year expense in other foreign jurisdictions. Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first five years of operations, which included fiscal 2018 through fiscal 2022. The India subsidiary is subject to 50% of regular India income taxes during its second five years of operations, which includes fiscal 2023 through fiscal 2027.

For federal income tax purposes, as of March 31, 2023, the Company had net operating loss carryforwards of approximately $132 million, which will expire from fiscal 2032 through fiscal 2038, and net operating loss carryforwards of $43.8 million that are not subject to expiration. For state purposes, at the end of fiscal 2023, the Company had $10.1 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2032 through fiscal 2043.