Taxes

12 Months Ended

Mar. 27, 2021

Income Tax Disclosure [Abstract]

Taxes

Taxes

The Company is a United Kingdom tax resident and is incorporated in the British Virgin Islands. Capri’s subsidiaries are subject to taxation in the U.S. and various other foreign jurisdictions, which are aggregated in the “Non-U.S.” information captioned below.

Income (loss) before provision for income taxes consisted of the following (in millions):

	Fiscal Years Ended
	March 27, 2021		March 28, 2020		March 30, 2019
U.S.	$	(56)	$	(28)	$	191
Non-U.S.	59		(187)		430
Total income (loss) before provision for income taxes	$	3	$	(215)	$	621

The provision for income taxes was as follows (in millions):

	Fiscal Years Ended
	March 27, 2021		March 28, 2020			March 30, 2019
Current
U.S. Federal	$	35	$	4	(2)	$	82	(1)
U.S. State	20		19			24
Non-U.S.	81		60			44
Total current	136		83			150
Deferred
U.S. Federal	(37)		(22)			(34)		(1)
U.S. State	(4)		(3)			(4)
Non-U.S.	(29)		(48)			(33)
Total deferred	(70)		(73)			(71)
Total provision for income taxes	$	66	$	10		$	79

(1)Includes a $25 million current tax provision and deferred tax benefit related to the U.S. Tax Act impact to business interest disallowance provisions.

(2)Includes a $35 million current tax benefit due to a release of income tax reserves in the U.S.

The Company’s provision for income taxes for the years ended March 27, 2021, March 28, 2020 and March 30, 2019 was different from the amount computed by applying the statutory U.K. income tax rates to the underlying income (loss) from operations before income taxes as a result of the following (amounts in millions):

	Fiscal Years Ended
	March 27, 2021					March 28, 2020					March 30, 2019
	Amount		% (1)			Amount		% (1)			Amount		% (1)
Provision for income taxes at the U.K. statutory tax rate	$	1	19.0	%		$	(41)	19.0	%		$	118	19.0	%
Effects of global financing arrangements	(24)		(953.4)	%		(41)		21.7	%	(4)	(50)		(8.1)	%
Effect of changes in valuation allowances on deferred tax assets	24		955.7	%		67		(30.9)	%	(5)	11		2.8	%	(3)
Non-deductible goodwill impairment	18		700.2	%	(6)	32		(15.1)	%	(6)	—		—	%
Differences in tax effects on foreign income	13		522.4	%		(7)		1.2	%		(15)		(1.8)	%	(2)
Liability for uncertain tax positions	11		414.2	%		(12)		5.7	%		8		1.3	%
Tax rate change impact on deferred items	9		351.3	%		—		—	%		—		—	%
Share based compensation	6		247.7	%		9		(4.2)	%		(12)		(2.6)	%
State and local income taxes, net of federal benefit	5		201.5	%		4		(1.9)	%		6		0.9	%
Withholding tax	4		165.0	%		3		(1.6)	%		3		0.6	%
Transaction cost	—		—	%		—		—	%		9		1.5	%
Other	(1)		(33.1)	%	(7)	(4)		1.4	%		1		(0.9)	%
	$	66	2,590.5	%		$	10	(4.7)	%		$	79	12.7	%

(1)Tax rates are calculated using unrounded numbers.

(2)Mainly attributable to the United States statutory federal income tax rate change from a blended rate for Fiscal 2018 of 31.54% to 21% in Fiscal 2019.

(3)Includes an $11 million provision related to a United Kingdom capital loss.

(4)Mainly attributable to pre-tax loss position in Fiscal 2020.

(5)Mainly attributable to valuation allowances established on a portion of non-U.S. deferred tax assets.

(6)Attributable to goodwill impairment charges related to Jimmy Choo reporting units in Fiscal 2021 and Fiscal 2020.

(7)Primarily relates to individually immaterial U.S. and foreign permanent adjustments.

Significant components of the Company’s deferred tax assets (liabilities) consist of the following (in millions):

	Fiscal Years Ended
	March 27, 2021		March 28, 2020
Deferred tax assets
Operating lease liabilities	501		521
Net operating loss carryforwards	139		109
Depreciation	54		33
Sales allowances	50		37
Accrued Interest	44		40
Derivative Financial Instruments	32		—
Inventories	25		34
Stock compensation	12		13
Payroll related accruals	3		3
Other	42		—
Total deferred tax assets	902		790
Valuation allowance	(159)		(134)
Net deferred tax assets	743		656
Deferred tax liabilities
Goodwill and intangibles	(495)		(481)
Operating lease right-of-use-assets	(367)		(401)
Other	—		(14)
Total deferred tax liabilities	(862)		(896)
Net deferred tax liabilities	$	(119)	$	(240)

The Company maintains valuation allowances on deferred tax assets applicable to subsidiaries in jurisdictions for which separate income tax returns are filed and where realization of the related deferred tax assets from future profitable operations is not reasonably assured. The valuation allowance increased $24 million, $94 million and $26 million in Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively. In certain jurisdictions, the Company increased the valuation allowance by $56 million, $113 million and $29 million and released valuation allowances of $32 million, $19 million and $3 million in Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively.

At March 27, 2021, the Company had non-U.S. and U.S. net operating loss carryforwards of $667 million, a portion of which will begin to expire in Fiscal 2022.

As of March 27, 2021 and March 28, 2020, the Company had liabilities related to its uncertain tax positions, including accrued interest, of $121 million and $109 million, respectively, which are included in other long-term liabilities in the Company’s consolidated balance sheets.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $92 million, $82 million and $112 million as of March 27, 2021, March 28, 2020 and March 30, 2019, respectively. A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding accrued interest, for Fiscal 2021, Fiscal 2020 and Fiscal 2019, are presented below (in millions):

	Fiscal Years Ended
	March 27, 2021		March 28, 2020			March 30, 2019
Unrecognized tax benefits beginning balance	$	99	$	192		$	101
Additions related to prior period tax positions	12		29			81		(1)
Additions related to current period tax positions	9		4			21
Decreases in prior period positions due to lapses in statute of limitations	(4)		(3)			(1)
Decreases related to prior period tax positions	(3)		(99)		(2)	(3)
Decreases related to audit settlements	(6)		(24)		(3)	(7)
Unrecognized tax benefits ending balance	$	107	$	99		$	192

(1)Primarily relates to the Versace acquisition.

(2)Primarily relates to releases of North American and European tax reserves.

(3)Primarily relates to the effective settlement of a U.S. audit.

The Company classifies interest and penalties related to unrecognized tax benefits as components of the provision for income taxes. Interest expense recognized in the consolidated statements of operations and comprehensive (loss) income for Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $15 million, $11 million and $11 million, respectively.

The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlement of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. The Company anticipates that the balance of gross unrecognized tax benefits, excluding interest and penalties, will be reduced by $31 million during the next 12 months, primarily due to the anticipated settlement of tax examinations as well as statute of limitation expirations. However, the outcomes and timing of such events are highly uncertain and changes in the occurrence, expected outcomes and timing of such events could cause the Company’s current estimate to change materially in the future.

The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. Most examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign, state and local income tax returns filed by the Company for years through Fiscal 2015 (March 28, 2015).

Prior to the enactment of the Tax Cuts and Jobs Act, the Company's undistributed foreign earnings were considered permanently reinvested and, as such, United States federal and state income taxes were not previously recorded on these earnings. As a result of the Tax Act, substantially all of the Company’s earnings in foreign subsidiaries generated prior to the enactment of the Tax Act were deemed to have been repatriated. It remains the Company's intent to either reinvest indefinitely substantially all of its foreign earnings outside of the United States or repatriate them tax neutrally. However, if future earnings are repatriated, the potential exists that the Company may be required to accrue and pay additional taxes, including any applicable foreign withholding tax and income taxes. It is not practicable to estimate the amount of tax that might be payable if these earnings were repatriated due to the complexities associated with the hypothetical calculation.

Cares Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, modifications to net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act require the Company to make significant judgments and estimates in the interpretation of the law and in the calculation of the provision for income taxes. However, additional guidance may be issued by the Internal Revenue Service (“IRS”), the Department of the Treasury or other governing body that may significantly differ from our interpretation of the law, which may result in a material effect on our business, cash flow, results of operations, or financial conditions.