INCOME TAXES

12 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES    Components of (Loss) income before income taxes are as follows:

	Fiscal Year Ended March 31,
	2023		2022		2021
Domestic	$	(937.0)	$	357.5	$	468.0
Foreign	(401.1)		107.9		209.8
(Loss) income before income taxes	$	(1,338.1)	$	465.4	$	677.8

Provision for (benefit from) current and deferred income taxes consists of the following:

	Fiscal Year Ended March 31,
	2023		2022		2021
Current:
U.S. federal	$	70.2	$	12.0	$	18.4
U.S. state and local	3.3		(0.6)		6.0
Foreign	98.0		24.1		27.4
Total current income taxes	171.5		35.5		51.8
Deferred:
U.S. federal	(175.4)		34.8		43.6
U.S. state and local	(31.4)		2.9		1.1
Foreign	(178.1)		(25.8)		(7.6)
Total deferred income taxes	(384.9)		11.9		37.1
(Benefit from) provision for income taxes	$	(213.4)	$	47.4	$	88.9

    A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:

	Fiscal Year Ended March 31,
	2023		2022		2021
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of U.S. federal benefit	2.0	%	1.2	%	1.1	%
Foreign tax rate differential(1)	(0.3)	%	(1.8)	%	(2.9)	%
Foreign earnings(2)	(1.3)	%	(2.3)	%	(0.1)	%
Tax credits(3)	5.7	%	(6.6)	%	(4.3)	%
Excess tax benefits from stock-based compensation	(0.5)	%	(3.1)	%	(2.0)	%
Earn-out adjustments	(0.4)	%	2.2	%	—	%
Valuation allowance—domestic	(6.3)	%	(0.1)	%	0.1	%
Valuation allowance—foreign	(0.1)	%	0.4	%	—	%
Nondeductible compensation	(0.9)	%	0.4	%	0.3	%
Global intangible low-taxed income	(3.1)	%	0.1	%	0.3	%
Foreign-derived intangible income	1.8	%	(0.9)	%	(0.8)	%
Change in reserves	(0.1)	%	(0.9)	%	(0.4)	%
Other(4)	(1.6)	%	0.6	%	0.8	%
Effective tax rate	15.9	%	10.2	%	13.1	%

(1) The foreign rate differentials in relation to foreign earnings, for all periods presented, are primarily driven by changes in the mix of our foreign earnings and the difference between the foreign and U.S. income tax rates.

(2) Fiscal years ended March 31, 2023 and March 31, 2022 include effects of an increase of the deferred tax asset related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.

(3) Tax benefits were recorded for fiscal years ended March 31, 2023, 2022, and 2021 attributable to certain tax credits related to software development activities.

(4) Includes nondeductible expense of $8.2 relating to loss on the redemption of convertible debt for the fiscal year ended March 31, 2023.

    The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:

	March 31,
	2023		2022
Deferred tax assets:
Tax credit carryforward	$	159.5	$	71.6
Capitalized development costs, software and depreciation	157.8		—
Equity-based compensation	109.8		88.4
Accrued compensation expense	96.6		106.0
Operating lease liabilities	90.6		54.3
Tax basis step up related to TRAF	79.1		58.5
Net operating loss carryforward	50.3		10.3
Deferred revenue	—		13.0
Other	26.0		12.0
Total deferred tax assets	769.7		414.1
Less: Valuation allowance	(338.2)		(121.9)
Net deferred tax assets	$	431.5	$	292.2
Deferred tax liabilities:
Intangible amortization	$	(841.0)	$	(45.1)
Right of use assets	(64.7)		(50.0)
Deferred revenue	(15.0)		—
Capitalized software and depreciation	—		(145.1)
Total deferred tax liabilities	(920.7)		(240.2)
Net deferred tax asset (1)	$	(489.2)	$	52.0

(1) As of March 31, 2023, $44.8 is included in Deferred tax assets and $534.0 is included in Other long-term liabilities. As of March 31, 2022, $73.8 is included in Deferred tax assets and $21.8 is included in Other long-term liabilities.

    The valuation allowance is primarily attributable to deferred tax assets for which no benefit is provided due to uncertainty with respect to their realization.

    At March 31, 2023, we had domestic net operating loss carryforwards totaling $652.5 of which $53.7 will expire from 2024 to 2029, $217.5 will expire from 2030 to 2040, $179.9 will expire from 2041 to 2043, and the remainder will be carried forward indefinitely. In addition, we had foreign net operating loss carryforwards of $84.5, of which $39.4 will expire from 2026 to 2030, $7.2 will expire from 2041 to 2043 and the remainder may be carried forward indefinitely.

    At March 31, 2023, we had domestic tax credit carryforwards totaling $359.9, of which $8.4 expire in 2024 to 2028, $67.3 expire from 2032 to 2042, and the remainder may be carried forward indefinitely.

    The total amount of undistributed earnings of foreign subsidiaries was approximately $64.6 at March 31, 2023 and $392.6 at March 31, 2022. As of March 31, 2023, it is our intention to reinvest indefinitely undistributed earnings of our foreign subsidiaries. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability that would arise if these earnings were remitted.

    We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions comply with applicable tax law and that we have adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse effect on our Consolidated Financial Statements. It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our effective tax rate in future periods.

    We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our Consolidated Statements of Operations. For the fiscal years ended March 31, 2023, 2022 and 2021, we recognized an increase of interest and penalties of $8.9, $1.9 and $2.6, respectively. The gross amount of interest and penalties accrued as of March 31, 2023 and 2022 was $20.2 and $11.2, respectively.

    As of March 31, 2023, we had gross unrecognized tax benefits, including interest and penalties, of $294.8, of which $137.2 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2023, gross unrecognized tax benefits increased by $118.8.

    We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2020 and state income tax returns for periods prior to the fiscal year ended March 31, 2019. With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2016. Certain U.S. state and foreign taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2016 through March 31, 2021.

    The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that a reduction of $61.3 of unrecognized tax benefits may occur within the next 12 months, some of which, depending on the nature of the settlement or expiration of statutes of limitations, may affect our income tax provision and therefore benefit the resulting effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.

    The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties, were as follows:

	Fiscal Year Ended March 31,
	2023		2022		2021
Balance, beginning of period	$	164.8	$	158.3	$	127.5
Additions:
Current year tax positions	26.5		10.3		18.9
Prior year tax positions(1)	109.7		4.2		21.0
Reduction of prior year tax positions	(26.3)		—		(1.0)
Lapse of statute of limitations	—		(8.0)		(8.1)
Balance, end of period	$	274.7	$	164.8	$	158.3

(1) Increase in prior year tax positions of $109.9 relates to purchase accounting for the Zynga acquisition.

    We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will not have a material adverse effect on our consolidated financial statements. However, there can be no assurances as to the possible outcomes.