Income Taxes

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 15. Income Taxes

For the fiscal years ended March 31, 2022, 2021 and 2020, the Company’s income tax provision was $54.1 million, $62.7 million and $53.8 million, respectively. For the fiscal years ended March 31, 2022, 2021 and 2020, the Company’s effective tax rate was 28.4%, 21.8% and 21.0%, respectively.

The components of the Company’s income tax provision are as follows:

	Fiscal Years Ended March 31,
	2022			2021			2020
				(in thousands)
Income (loss) before provision for income taxes:
United States	$	260,626		$	249,204		$	214,825
Foreign		(70,066	)		39,016			42,000
Income before income taxes		190,560			288,220			256,825
Current tax expense:
Federal		25,893			8,624			—
State		9,184			12,379			6,563
Foreign		16,565			12,312			14,300
		51,642			33,315			20,863
Deferred tax expense (benefit):
Federal		5,376			30,413			33,239
State		(1,720	)		(2,382	)		1,584
Foreign		(1,243	)		1,349			(1,870	)
		2,413			29,380			32,953
Total income tax provision	$	54,055		$	62,695		$	53,816

The components of the Company’s net deferred taxes were as follows:

	March 31, 2022			March 31, 2021
	(in thousands)
Deferred tax assets
Net operating loss and tax credit carryforwards	$	29,802		$	27,893
Stock-based compensation		14,608			13,790
Nondeductible reserves and accruals		15,441			12,097
Foreign net operating loss carryforwards		9,107			6,856
Deferred revenue		5,830			5,522
Other, net		312			363
	$	75,100		$	66,521
Deferred tax liabilities
Goodwill		(7,829	)		(7,897	)
In-process research and development		(12,063	)		(12,496	)
Depreciation		(14,197	)		(11,747	)
Basis differences on other investments		(11,442	)		(7,766	)
Domestic deferred tax liability on foreign net operating loss carryforwards		(393	)		(415	)
		(45,924	)		(40,321	)
Net deferred tax assets		29,176			26,200
Valuation allowance		(19,405	)		(15,667	)
Net deferred tax assets	$	9,771		$	10,533
Reported as:
Deferred tax assets	$	10,552		$	11,380
Deferred tax liabilities		(781	)		(847	)
Net deferred tax assets	$	9,771		$	10,533

The significant differences between the statutory and effective income tax rate consist of the following items:

	Fiscal Years Ended March 31,
	2022				2021				2020
Statutory income tax rate		21.0		%		21.0		%		21.0		%
Increase (decrease) resulting from:
Credits		(11.3	)			(6.0	)			(10.8	)
Non-deductible acquired IPR&D		10.5				—				—
Rate differential on foreign operations		6.5				4.1				3.2
Excess tax benefits from stock-based awards		(4.8	)			(3.3	)			(5.2	)
State taxes, net		4.3				3.2				3.1
Non-deductible officers’ compensation		2.0				1.4				1.2
Permanent differences		0.9				1.0				3.8
Change in valuation allowance		0.3				0.3				5.3
Other		(1.0	)			0.1				(0.6	)
Effective tax rate		28.4		%		21.8		%		21.0		%

The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realization of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more likely than not realizable, the Company evaluates all available positive and negative evidence, and weights the evidence based on its objectivity.

As of March 31, 2022 and 2021, respectively, the Company maintained a valuation allowance of $19.4 million and $15.7 million for deferred tax assets primarily related to foreign tax credits. Based on the review of all available evidence, the Company recorded a valuation allowance to reduce these deferred tax assets to the amount that is more likely than not to be realizable as of March 31, 2022 and 2021.

Changes in the valuation allowance for deferred tax assets were as follows:

	Fiscal Years Ended March 31,
	2022		2021		2020
	(in thousands)
Balance at beginning of year	$	15,667	$	15,170	$	1,302
Increase		3,738		497		13,868
Balance at end of year	$	19,405	$	15,667	$	15,170

The Company recognized excess tax benefits associated with stock-based awards of $10.7 million, $12.1 million and $14.8 million as an income tax benefit for fiscal years ended March 31, 2022, 2021 and 2020, respectively. The amount of future excess tax benefits or shortfalls will likely fluctuate from period to period based on the price of the Company’s stock, the number of restricted stock units that vest or stock options that are exercised, and the fair value assigned to such stock-based awards.

As of March 31, 2022, the Company had foreign net operating losses (“NOLs”) of approximately $32.7 million. As of March 31, 2022, the Company had foreign tax credits of $14.9 million which expire in varying years from fiscal year 2029 through fiscal year 2032. In addition, as of March 31, 2022, the Company had federal and state research and development credit carryforwards of approximately $0.4 million and $15.0 million, respectively, which expire in varying years from fiscal year 2023 through fiscal year 2041.

The Company’s operating income outside the U.S. is deemed to be permanently reinvested in foreign jurisdictions, most of which are disregarded entities for domestic tax purposes. Therefore, any repatriation of cash and cash equivalents held by foreign subsidiaries to the U.S. is not expected to be significant.

As of March 31, 2022 and 2021, the Company has no material uncertain tax positions, and no interest and penalties on uncertain tax positions were recognized during fiscal years ended March 31, 2022, 2021 and 2020, respectively. The Company is subject to the examination of its income tax returns by the IRS and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company’s management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. The Company’s most recent completed income tax audits were in the U.S., relating to fiscal year 2016 and in Germany, which covered fiscal years 2016 through 2019. These tax audits did not materially impact the Company’s financial statements. All other tax years remain subject to examination by the IRS, state and foreign tax authorities.