INCOME TAXES

12 Months Ended

Mar. 31, 2020

The domestic (Singapore) and foreign components of income before income taxes were comprised of the following:



	Fiscal Year Ended March 31,
	2020			2019			2018
	(In thousands)
Domestic	$	(2,903	)	$	(10,498	)	$	323,522
Foreign	161,388			192,624			197,371
Total	$	158,485		$	182,126		$	520,893

The provision for income taxes consisted of the following:



	Fiscal Year Ended March 31,
	2020			2019			2018
	(In thousands)
Current:
Domestic	$	1,781		$	1,517		$	2,894
Foreign	62,558			99,894			50,889
	64,339			101,411			53,783
Deferred:
Domestic	(38		)	(40		)	422
Foreign	6,605			(12,644		)	38,154
	6,567			(12,684		)	38,576
Provision for income taxes	$	70,906		$	88,727		$	92,359

The domestic statutory income tax rate was approximately 17.0% in fiscal years 2020, 2019 and 2018. The reconciliation of the income tax expense expected based on domestic statutory income tax rates to the expense for income taxes included in the consolidated statements of operations is as follows:



	Fiscal Year Ended March 31,
	2020			2019			2018
	(In thousands)
Income taxes based on domestic statutory rates	$	26,943		$	30,961		$	88,552
Effect of tax rate differential	(81,213		)	(135,033		)	(244,128		)
Change in unrecognized tax benefit	(896		)	(15,381		)	22,180
Change in valuation allowance	92,543			191,896			297,330
Recognition of prior year taxes recoverable	13,305			5,439			(53,757		)
Expiration of tax attributes	—			4,277			—
APB23 tax liability	8,653			2,047			1,741
Other	11,571			4,521			(19,559		)
Provision for income taxes	$	70,906		$	88,727		$	92,359

A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to attract and retain business. In general, these holidays were secured based on the nature, size and location of the Company’s operations. The aggregate dollar effect on the Company’s income resulting from tax holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2020, 2019 and 2018 was $15.6 million, $24.4 million and $21.7 million, respectively. For the fiscal year ended March 31, 2020, the effect on basic and diluted earnings per share was $0.03 and $0.03, respectively, and the effect on basic and diluted earnings per share during fiscal years 2019 and 2018 were $0.05 and $0.05, and $0.04 and $0.04, respectively. Unless extended or otherwise renegotiated, the Company's existing holidays will expire in various years through the end of fiscal year 2028.

The Company provides a valuation allowance against deferred tax assets that in the Company's estimation are not more likely than not to be realized. During fiscal year 2020, 2019 and 2018, the Company released valuation allowances totaling $1.1 million, $2.8 million and $1.3 million, respectively. For fiscal year 2020, this valuation allowance release was related to certain operations in China as this amount was deemed to be more likely than not to be realized due to the sustained profitability during the past three fiscal years as well as continued forecasted profitability of those subsidiaries. In addition, a valuation allowance of $3.4 million was added for a different operating subsidiary in China due to continued losses and the determination the company would be less likely than not to utilize its deferred tax assets. Various other valuation allowance positions were also reduced due to varying factors such as recognition of uncertain tax positions impacting deferred tax assets, one-time income recognition in loss entities, and foreign exchange impacts on deferred tax balances. Lastly, these valuation allowance reductions

and eliminations were offset by current period valuation allowance additions due to increased deferred tax assets as a result of current period losses in legal entities with existing full valuation allowance positions. For fiscal years ended March 31, 2020, 2019 and 2018, the offsetting amounts totaled $90.2 million, $194.8 million and ($65.9) million, respectively.

Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to Singapore. The Company has included the effects of Singapore's territorial tax system in the rate differential line above. The tax effect of foreign income not repatriated to Singapore for the fiscal years ended March 31, 2020, 2019 and 2018 were $27.9 million, $7.5 million and $65.8 million, respectively.

The components of deferred income taxes are as follows:



	As of March 31,
	2020			2019
	(In thousands)
Deferred tax liabilities:
Fixed assets	$	(36,789	)	$	(39,376	)
Intangible assets	(49,637		)	(57,939		)
Others	(25,818		)	(14,879		)
Total deferred tax liabilities	(112,244		)	(112,194		)
Deferred tax assets:
Fixed assets	58,623			67,980
Intangible assets	6,568			7,442
Deferred compensation	17,456			13,864
Inventory valuation	26,742			11,082
Provision for doubtful accounts	5,120			4,797
Net operating loss and other carryforwards	1,820,980			1,944,782
Others	207,910			243,016
Total deferred tax assets	2,143,399			2,292,963
Valuation allowances	(1,939,279		)	(2,083,082		)
Total deferred tax assets, net of valuation allowances	204,120			209,881
Net deferred tax asset	$	91,876		$	97,687
The net deferred tax asset is classified as follows:
Long-term asset	$	162,737		$	164,611
Long-term liability	(70,861		)	(66,924		)
Total	$	91,876		$	97,687

Utilization of the Company's deferred tax assets is limited by the future earnings of the Company in the tax jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the Company. However, management has determined that it is more likely than not that the Company will realize certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that have no current impact on the tax provision.

The Company has recorded deferred tax assets of approximately $1.9 billion related to tax losses and other carryforwards against which the Company has recorded a valuation allowance for all but $81.9 million of the deferred tax assets. These tax losses and other carryforwards will expire at various dates as follows:



Expiration dates of deferred tax assets related to operating losses and other carryforwards
	(In thousands)
2021 - 2026	$	613,769
2027 - 2032	476,336
2033 and post	199,327
Indefinite	629,835
	$	1,919,267

The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ from management’s estimates.

The Company does not provide for income taxes on approximately $1.4 billion of undistributed earnings of its subsidiaries which are considered to be indefinitely reinvested outside of Singapore as management has plans for the use of such earnings to fund certain activities outside of Singapore. The estimated amount of the unrecognized deferred tax liability on these undistributed earnings is approximately $128 million. As a result, as of March 31, 2020, the Company has provided for earnings in foreign subsidiaries that are not considered to be indefinitely reinvested and therefore subject to withholding taxes on $97.6 million of undistributed foreign earnings, recording a deferred tax liability of approximately $8.7 million thereon.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Fiscal Year Ended March 31,
	2020			2019
	(In thousands)
Balance, beginning of fiscal year	$	251,722		$	227,590
Additions based on tax position related to the current year	24,052			82,966
Additions for tax positions of prior years	4,137			5,575
Reductions for tax positions of prior years	(3,162		)	(15,432		)
Reductions related to lapse of applicable statute of limitations	(18,355		)	(14,786		)
Settlements	—			(22,174		)
Impact from foreign exchange rates fluctuation	(12,386		)	(12,017		)
Balance, end of fiscal year	$	246,008		$	251,722

The Company’s unrecognized tax benefits are subject to change over the next twelve months primarily as a result of the expiration of certain statutes of limitations and as audits are settled. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an estimated of an additional approximately $16 million within the next twelve months primarily due to potential settlements of various audits and the expiration of certain statutes of limitations.

The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2008.

Of the $246.0 million of unrecognized tax benefits at March 31, 2020, $165.6 million will affect the annual effective tax rate (ETR) if the benefits are eventually recognized. The amount that doesn’t impact the ETR relates to positions that would be settled with a tax loss carryforward previously subject to a valuation allowance.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company’s tax expense. During the fiscal years ended March 31, 2020, 2019 and 2018, the Company recognized interest and penalty of approximately ($0.9) million and ($2.9) million and ($3.3) million, respectively. The Company had approximately $12.3 million, $13.3 million and $16.2 million accrued for the payment of interest and penalty as of the fiscal years ended March 31, 2020, 2019 and 2018, respectively.