Income Taxes

9 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 10 – Income Taxes

Our provision for income taxes was $112 million and $212 million for the three and nine months ended December 31, 2022, respectively, compared to $233 million and $697 million for the same periods in fiscal 2022. Our effective tax rate was 24 percent and 25 percent for the three and nine months ended December 31, 2022, respectively, compared to 24 percent and 23 percent for the same periods in fiscal 2022. The decrease in the provision for income taxes for the three and nine months ended December 31, 2022, compared to the same periods in fiscal 2022, was primarily due to the decrease in income before income taxes. The higher effective tax rate for the first nine months of fiscal 2023, compared to the same period in fiscal 2022, was primarily attributable to the decrease in federal plug-in vehicle credits and the increase in unrecognized state tax benefits in the current period.

In August 2022, the Inflation Reduction Act ("the Act") was signed into law. The Act modifies climate and clean energy corporate tax provisions, including amendments to the federal tax credit for plug-in vehicles available under current tax law. The Act also includes a 15 percent corporate alternative minimum tax based on modified financial statement net income, applying to tax years beginning after December 31, 2022, which we expect to be applicable in fiscal 2024. As additional guidance related to the Act is issued, we will evaluate any impact to our consolidated financial statements. We do not expect the Act to have a material impact on our results of operations for fiscal 2023.

Tax-related Contingencies

As of December 31, 2022, we remain under IRS examination for fiscal 2018 through fiscal 2023.

We periodically review our uncertain tax positions. Our assessment is based on many factors including any ongoing IRS audits. For the three months ended December 31, 2022, our assessment did not result in a material change in unrecognized tax benefits.

Our deferred tax assets include the deferred deduction of allowance for credit losses and residual value loss estimates, mark-to-market adjustment of investment in marketable securities, and other deferred costs. The total deferred tax liability, net of these deferred tax assets, was $3.1 billion and $1.6 billion at December 31, 2022 and March 31, 2022, respectively. The increase in our net deferred tax liability was primarily due to the temporary difference between depreciation expense reported for financial statement and that reported for income tax purposes. Although realization of the deferred tax assets is not assured, management believes it is more likely than not that the deferred tax assets will be realized. The amount of the deferred tax assets considered realizable could be reduced if management’s estimates change.