21. Income Taxes

The income (loss) before income tax provision (benefit) includes the following components:


	Year Ended		Year Ended		Year Ended
	March 31, 2021		March 31, 2020		March 31, 2019
Domestic (U.S.)	$	(145,328)	$	(1,091,272)	$	(70,607)
Foreign		(2,069)		421		-
Total	$	(147,397)	$	(1,090,851)	$	(70,607)

The income tax provision (benefit) was as follows:


	Year Ended		Year Ended		Year Ended
	March 31, 2021		March 31, 2020		March 31, 2019
Current:
U.S. Federal	$	2,515	$	—	$	—
U.S. State		5,805		466		—
Foreign		2,789		102		—
Current income tax provision (benefit)		11,109		568		—
Deferred:
U.S. Federal		(47,052)		(113,523)		(15,468)
U.S. State		(1,249)		(30,297)		(3,127)
Foreign		2,005		(2)		—
Deferred income tax provision (benefit)		(46,296)		(143,822)		(18,595)
Total income tax provision (benefit)	$	(35,187)	$	(143,254)	$	(18,595)

Effective Tax Rate

The reconciliation between the federal statutory rate and the effective income tax rate is as follows:


	Year Ended		Year Ended			Year Ended
	March 31, 2021		March 31, 2020			March 31, 2019
Statutory U.S. federal tax rate	21.0	%	21.0	%		21.0	%
State income taxes (net of federal benefit)	(2.7)		2.1			3.5
Change in fair value of equity based awards	—		(1.2)			1.0
Look through accounting policy election	—		2.1			—
Research and development credit	11.0		0.2			1.6
Gain on sale of business	(4.4)		—	—	—	—
Foreign income taxes	(1.5)		—	—	—	—
Equity compensation	(1.3)		—	—	—	—
eRx option	2.9		—	—	—	—
Goodwill impairment charge	—		(10.8)			—
Other	(1.2)		(0.3)			(0.8)
Effective income tax rate	23.8	%	13.1	%		26.3	%

Deferred Tax Assets and Liabilities

Prior to the Merger, we recorded deferred tax assets and liabilities using the outside basis approach and as a result of the Merger, we elected to begin recording deferred tax assets and liabilities using the look through approach. Therefore, the change in deferred tax assets and liabilities for the year ended March 31, 2020 reflects the impact of both our change in accounting as well as the impact of the Merger accounted for under ASC 805 as described in Note 4, Business Combinations. The change in accounting resulted in a reduction to our deferred tax liability of $28,576.

Significant components of our deferred tax assets (liabilities) were as follows:


	March 31, 2021		March 31, 2020
Depreciation and amortization	$	(1,046,755)	$	(1,034,407)
Net operating losses		299,606		348,329
Tax receivable agreements obligations to related parties		67,633		68,900
Fair value of interest rate cap agreements		1,466		14,011
Accruals and reserves		60,661		15,680
Tax credits		38,138		16,629
Debt discount and interest		(6,594)		(9,661)
Equity compensation		38,289		18,560
Valuation allowance		(20,238)		(29,350)
163(j) Business interest expense limitation		2,056		23,842
Accounting method change (ASC 606 adoption)		(23,315)		(31,886)
Right of use asset		(24,262)		—
Right of use liability		27,377		—
Residual deferred tax asset		5,518		12,072
Accounts receivable		6,107		5,793
Other		(2,779)		(3,696)
Net deferred tax assets (liabilities)	$	(577,092)	$	(585,184)
Reported as:
Non-current deferred tax assets		28,199		30,720
Non-current deferred tax liabilities		(605,291)		(615,904)
Net deferred tax assets (liabilities)	$	(577,092)	$	(585,184)

At March 31, 2021, we had net operating loss carryforwards for federal and state income tax purposes of $1,033,208 and $1,518,520, respectively, which expire from 2031 through 2037 and 2022 through 2040, respectively. At March 31, 2021, we had operating loss carryforwards for foreign tax purposes of $4,117, certain of which expire starting in 2024. A portion of net operating loss carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods due to “change of ownership” provisions; however, we do not believe the limitation will impact our ability to utilize the net operating loss carryforwards.

At March 31, 2021, we had research and development (“R&D”) tax credit carryforwards for federal and state income tax purposes of $35,278 and $2,665, respectively. The federal credits expire from 2038 through 2041, while all of the state credits have an indefinite carryforward period.

We believe that it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards and a residual deferred tax asset recorded under the look through approach will not be realized. In recognition of this risk, we have recorded a valuation allowance of $14,719 on the deferred tax assets related to these net operating loss carryforwards and a valuation allowance of $5,519 on the residual deferred tax asset. If recognized, the tax benefits related to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction of income tax expense of $20,238.

Unrecognized Tax Benefits

The federal, state and foreign net operating loss carryforwards and R&D tax credits within the income tax returns filed included unrecognized tax benefits. The deferred tax assets recognized for those net operating losses and R&D tax credits are presented net of unrecognized tax benefits.

A reconciliation of unrecognized tax benefits is as follows:


	Year Ended		Year Ended
	March 31, 2021		March 31, 2020
Beginning unrecognized benefit	$	56,177	$	863
Decreases from prior period tax positions		—		(2)
Increases from prior period tax positions		3,010		—
Increases from current period tax positions		4,923		769
Increases from acquisition		—		54,547
Ending unrecognized benefit	$	64,110	$	56,177

If the above unrecognized tax benefits were recognized, $54,380 would affect the effective income tax rate.

We recognize interest income and expense (if any) related to income taxes as a component of income tax expense. We recognized interest and penalties of $121, $138 and $0 for the years ended March 31, 2021, 2020 and 2019, respectively.

We file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The U.S. federal and state income tax returns for certain subsidiaries remain subject to examination by the Internal Revenue Service for the tax years 2013 and beyond (i.e., periods prior to the Transactions). With respect to state and foreign jurisdictions, we are typically subject to examination for a number of years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties have been provided for in the consolidated financial statements for any adjustments that may be incurred due to state, local or foreign audits.

Tax Legislation Updates

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. Included in the CARES Act are numerous income tax provisions including changes to the net operating loss rules and the business interest expense deduction rules under Code Section 163(j). The Company anticipates benefiting from the changes to the business interest expense deduction rules which temporarily increase the amount of interest expense that businesses are allowed to deduct on their tax returns by increasing the 30% Adjusted Taxable Income limitation to 50% for corporations for tax years 2019 and 2020. Such benefit resulted in an increase in the amount of deductible interest available to the Company in 2020 and 2021. However, this did not result in any immediate change to the Company’s tax position given the amount of net operating losses currently available.

In addition, the CARES Act accelerates the remaining alternative minimum tax (“AMT”) credit refund allowances resulting in taxpayers being able to immediately claim a refund in full for any AMT credit carryforwards, which should provide the Company with the accelerated receipt of its AMT credit refund of $869.