Income Taxes

9 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the third quarter of fiscal 2024 and 2023 was based on the estimated effective tax rates applicable for the full years ending March 31, 2024 and March 31, 2023, respectively, after giving effect to items specifically related to the interim periods. The Company’s effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions, in which the Company operates, changes in tax laws and the amount of the Company's consolidated earnings before taxes.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. The IRA includes multiple incentives to promote clean energy, and energy storage manufacturing among other provisions with tax credits available from 2023 to 2032, subject to phase down beginning in 2030. In particular the IRA creates a refundable tax credit, pursuant to Section 45X of the Internal Revenue Code (“IRC”), for battery cells and battery modules manufactured or assembled in the United States and sold to third parties. On December 14, 2023, the United States Treasury issued proposed regulations which provided further guidance related to the Section 45X Advanced Manufacturing Production Credit. In the third quarter and nine months of fiscal 2024, the IRA impact resulted in a reduction of our costs of goods sold and income tax payable of $59,119 and $100,353, respectively. The issuance of the aforementioned proposed regulations resulted in a $28,683 retroactive adjustment to the beginning of the effective date of the IRA, January 1, 2023, in the third quarter of fiscal 2024. Amounts recognized in the Consolidated Condensed Financial Statements are based on Management's judgement and best estimate utilizing the most current guidance. The Company will continue to evaluate the effects of IRA to the extent more guidance is issued and the relevant implications to our Consolidated Condensed Financial Statements. Actual results could differ from management’s current estimate.

The consolidated effective income tax rates for the third quarter of fiscal 2024 and 2023 were 3.2% and 23.2% and for the nine months of fiscal 2024 and 2023 were 7.7% and 18.5%, respectively. The rate decrease in the third quarter and nine months of fiscal 2024 compared to the prior year periods are primarily due to the impact of the IRA and mix of earnings among tax jurisdictions.

Foreign income as a percentage of worldwide income is estimated to be 52% for fiscal 2024 compared to 83% for fiscal 2023. This reduction is primarily due to the IRA Impact on domestic and total earnings. The foreign effective tax rates for the nine months of fiscal 2024 and 2023 were 11% and 15%, respectively. Income from the Company's Swiss subsidiary comprised a substantial portion of the Company's overall foreign mix of income for both fiscal 2024 and fiscal 2023 and were taxed at an effective income tax rate of approximately 9% in both periods.