Income Taxes

3 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

13. INCOME TAXES

The Company’s effective tax rate will vary based on a variety of factors, including overall profitability, the geographical mix of income before taxes and related tax rates in jurisdictions where it operates and other one-time charges, as well as the occurrence of discrete events. For the three months ended June 30, 2020 and 2019, the Company utilized an effective tax rate of 27.8% and (10.9%), respectively, to calculate its provision for income taxes. State and local income taxes and the Company’s Employee Stock Ownership Plan (“ESOP”) increased the effective rate for the three months ended June 30, 2020 and 2019. Additionally, the effective tax rate for the three months ended June 30, 2019 differed from the federal statutory rate primarily due to a $60.7 million discrete income tax expense. This discrete event related to the 11.6 million shares allocated from the ESOP as a result of the special dividend paid on June 14, 2019 and the Company recognizing approximately $246.8 million in additional stock-based compensation expense. Of the total stock-based compensation expense and dividends paid, approximately $242.9 million related to non-deductible stock appreciation and deductible dividends. This discrete event reduced the effective tax rate by 29.6%.

As discussed in “Note 3. Acquisitions”, the Company acquired Infiltrator Water Technologies on July 31, 2019. As part of the purchase price, approximately $132.4 million was attributed to deferred tax liabilities. Of the $132.4 million, $82.3 million related to the step up of GAAP basis for fair market valuations, while the remaining $50.1 million were acquired deferred tax liabilities. Of the total $82.3 million, $80.2 million was attributed to intangibles. The Company also acquired a federal net operating loss of $24.0 million.