Income Taxes

9 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate to income from operations and adjusts the provision for discrete tax items occurring in the period. The Company’s effective tax rate for the three months ended December 31, 2021 was 16% compared to 21% for the three months ended December 31, 2020. The Company’s effective tax rate for the nine months ended December 31, 2021 was 5% compared to 22% for the nine months ended December 31, 2020. The decrease in the effective tax rate for both the three months ended December 31, 2021 and 2020 and nine months ended December 31, 2021 and 2020 is primarily due to additional share-based compensation tax windfall benefits and a $2.1 million one-time benefit related to anticipated tax refunds resulting from a favorable Polish research and development ruling received by the Company in August 2021.

Based on the Company’s review of both positive and negative evidence regarding the realizability of deferred tax assets at December 31, 2021, a valuation allowance continues to be recorded against certain deferred tax assets based upon the conclusion that it was more likely than not that these assets would not be realized. The valuation allowance at December 31, 2021 relates primarily to accrued interest, capitalized development costs, and foreign tax credits. Given the Company’s current earnings and anticipated future earnings, it is reasonably possible that within the next twelve months sufficient positive evidence may become available to allow the Company to conclude that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets. However, the exact timing and amount of the valuation allowance release are subject to change based on the Company’s growth and profitability.