

	Fiscal Year Ended March 31,
	2020			2019			2018
Income tax expense (benefit)
Federal	$	198,307		$	3,213		$	(393	)
State	47,992			575			1,198
Foreign	12,468			5,920			11,638
Total current tax position	258,767			9,708			12,443
Federal	(50,086		)	(29,021		)	(72,336		)
State	(5,839		)	(5,464		)	(990		)
Foreign	(3,351		)	1,060			(114		)
Total deferred tax provision	(59,276		)	(33,425		)	(73,440		)
Total income tax expense (benefit)	$	199,491		$	(23,717	)	$	(60,997	)

The Company’s income tax expense of $199.5 million for the year ended March 31, 2020 differed from the amount computed on pre-tax loss at the U.S. federal income tax rate of 21.0%, because of non-deductible share-based compensation and the effects of the reorganization transactions, which produced gain on the difference between the fair market value of the Compuware assets distributed and the adjusted tax basis in such assets, generating a tax liability that was only partially offset by the use of U.S. foreign tax credits that previously were subject to a valuation allowance. The Company evaluated the provisions of the Tax Cuts and Jobs Act (“TCJA”) and recorded a $3.9 million tax benefit to the financial statements for the year ended March 31, 2020 exclusively related to the foreign derived intangible income (“FDII”). Refer to the tax legislation section below for further discussion of these legislative matters.

The Company’s income tax benefit of $23.7 million for the year ended March 31, 2019 differed from the amount computed on pre-tax loss at the U.S. federal income tax rate of 21.0% primarily because of non-deductible share-based compensation, the effects of which were partially offset by U.S. tax credits generated during the year. The Company evaluated the provisions of the TCJA and recorded a $1.8 million tax benefit to the financial statements for the year ended March 31, 2019 exclusively related to the FDII.

The Company’s income tax benefit of $61.0 million for the year ended March 31, 2018 differed from the amount computed on pre-tax income at the U.S. federal blended rate of 31.5% primarily due to the enactment of the TCJA. The Company recognized a tax benefit of $50.0 million from revaluing U.S. net deferred tax liabilities to the reduced U.S. federal income tax rate of 21.0%. The Transition Tax had no impact on the Company’s income tax provision.



	Fiscal Year Ended March 31,
	2020			2019			2018
Income tax (benefit) at U.S. federal statutory income tax rate	$	(45,892	)	$	(29,381	)	$	(16,309	)
State and local tax expense	(3,100		)	(4,890		)	208
Foreign tax rate differential	3,521			2,051			3,619
Branch income	1,601			1,824			384
Non-deductible expenses	35,874			11,807			8,645
Tax credits	(35,354		)	(13,233		)	(6,173		)
Sharing of consolidated tax attributes	—			—			(8,890		)
Foreign derived intangibles deduction	(3,901		)	(1,790		)	—
Tax associated with reorganization	251,819			—			—
Changes in tax law	—			—			(50,033		)
Changes in valuation allowance	(9,682		)	6,087			5,133
Foreign withholding tax	4,231			3,086			2,701
Other adjustments	374			722			(282		)
Total income tax expense (benefit)	$	199,491		$	(23,717	)	$	(60,997	)

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the jurisdictional cumulative loss incurred over the three year period ended March 31, 2020. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projections for future growth.

On the basis of this evaluation, a valuation allowance of $22.0 million and $31.7 million has been recorded as of March 31, 2020 and 2019, respectively. Only the portion of the deferred tax asset that is more likely than not to be realized has been recorded. It is reasonably possible a material adjustment in the amount of the deferred tax asset considered realizable will occur within one year if estimates of future taxable income during the carryforward period are reduced or increased, if objective negative evidence in the form of cumulative losses is no longer present, or if additional weight is given to subjective evidence such as the Company’s projections for growth.



	March 31,
	2020			2019
Deferred revenue	$	27,681		$	4,752
Capitalized research and development costs	11,140			—
Accrued expenses	6,625			5,983
Share-based compensation	16,660			4,776
Fixed assets	279			447
Net operating loss carryforwards	4,046			4,470
Other tax carryforwards, primarily foreign tax credits	14,603			32,630
Other	2,823			1,183
Total deferred tax assets before valuation allowance	83,857			54,241
Less: valuation allowance	(21,996		)	(31,678		)
Net deferred tax assets	61,861			22,563
Intangible assets	40,270			51,531
Capitalized research and development costs	—			822
State taxes	251			6,090
Other	880			1,040
Total deferred tax liabilities	41,401			59,483
Net deferred tax assets (liabilities)	$	20,460		$	(36,920	)
Long-term deferred tax assets	20,460			10,678
Long-term deferred tax liabilities	—			(47,598		)
Net deferred tax assets (liabilities)	$	20,460		$	(36,920	)

At March 31, 2020 and 2019, the Company had net operating losses (tax-effected) and tax credit carryforwards for income tax purposes before valuation allowance of $18.6 million, and $37.1 million, respectively, that expire in the tax years as follows (in thousands):



	Fiscal Year Ended March 31,
	2020		2019		Expiration
Non-U.S. net operating losses	$	3,726	$	4,301	Indefinite
Non-U.S. net operating losses	159		169		2021 - 2026
U.S. federal and state tax carryforwards	161		2,657		Indefinite
U.S. federal and state tax carryforwards, primarily foreign tax credits	14,603		29,973		2026 - 2027
Total carryforwards	$	18,649	$	37,100

The amount of gross unrecognized tax benefits was $17.4 million and $9.7 million as of March 31, 2020 and 2019, respectively, all of which would favorably affect the Company’s effective tax rate if recognized in future periods.



	Fiscal Year Ended March 31,
	2020			2019			2018
Gross unrecognized tax benefit, beginning of year	$	9,653		$	9,143		$	8,770
Gross increases to tax positions for prior periods	438			20			257
Gross decreases to tax positions for prior periods	(6,210		)	(70		)	(482		)
Gross increases to tax positions for current period	13,543			560			598
Gross unrecognized tax benefit, end of year	$	17,424		$	9,653		$	9,143

As of March 31, 2020 and 2019, the net interest and penalties payable associated with its uncertain tax positions was $0.2 million and $0.1 million, respectively. During the year ended March 31, 2020, the Company recognized expense related to interest and penalties of $0.1 million. During the years ended March 31, 2019 and 2018, the Company recognized an immaterial amount of net interest expense.

The Company has open years in all significant federal, state and foreign jurisdictions, going back to as far as 2010 in certain locations. The U.S. federal income tax return has open years back to 2016. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations due to the amount, timing or inclusion of revenue and expenses.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company is required to recognize the effects of tax law changes in the period of enactment. The CARES Act impacted the Company’s assessment of the realizability of deferred tax assets as the carry back of net operating losses was used as a source of income. There were no other effects to the Company’s tax provision as a result of the CARES Act as of March 31, 2020.

On December 22, 2017, President Trump signed into law the TCJA. For the tax year of enactment, the TCJA included, among other items, a permanent reduction to the U.S. corporate income tax rate from 35% to 21% and immediate taxation of accumulated, unremitted non-U.S. earnings (the “Transition Tax”).