Provision for Taxes

12 Months Ended

Mar. 31, 2024

Disclosure Text Block [Abstract]

Provision for Taxes

Note 15. Provision for Taxes

Earnings before taxes and the provision for taxes consisted of the following:

		Years Ended March 31,
		2024			2023			2022
		(In thousands)
Pretax earnings:
U.S.	$		816,238	$		1,179,738	$		1,432,231
Non-U.S.			23,939			39,659			44,342
Total pretax earnings	$		840,177	$		1,219,397	$		1,476,573
Current provision
Federal	$		66,356	$		115,171	$		189,488
State			44,707			42,121			55,518
Non-U.S.			254			5,150			6,893
			111,317			162,442			251,899
Deferred provision
Federal			88,549			114,355			90,852
State			6,542			14,077			6,355
Non-U.S.			5,062			4,051			3,105
			100,153			132,483			100,312
Provision for income tax expense	$		211,470	$		294,925	$		352,211
Income taxes paid (received)	$		68,623	$		145,680	$		(4,548	)

The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before taxes was as follows:

	Years Ended March 31,
	2024				2023				2022
	(In percentages)
Statutory federal income tax rate		21.00		%		21.00		%		21.00		%
Increase (reduction) in rate resulting from:
State taxes, net of federal benefit		4.78		%		3.56		%		3.24		%
Foreign rate differential		0.03		%		0.08		%		0.05		%
Federal tax credits		(0.58	)	%		(0.48	)	%		(0.19	)	%
Tax-exempt income		(0.04	)	%		(0.08	)	%		(0.03	)	%
Dividend received deduction		(0.01	)	%		(0.01	)	%		—		%
Other		(0.01	)	%		0.15		%		(0.22	)	%
Effective income tax rate		25.17		%		24.22		%		23.85		%

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

		March 31,
		2024			2023
Deferred tax assets:		(In thousands)
Benefit of tax net operating loss, interest and credit carryforwards	$		36,978	$		33,778
Accrued expenses			117,481			112,971
Policy benefit and losses, claims and loss expenses payable, net			33,736			36,374
Unrealized losses on investments			32,856			48,179
Operating leases			11,521			12,058
Total deferred tax assets	$		232,572	$		243,360
Deferred tax liabilities:
Property, plant and equipment	$		1,655,074	$		1,545,628
Operating leases			11,214			12,175
Deferred policy acquisition costs			10,709			12,038
Other			2,700			3,008
Total deferred tax liabilities			1,679,697			1,572,849
Net deferred tax liability	$		1,447,125	$		1,329,489

The NOL, interest and credit carry-forwards in the above table are primarily attributable to state NOLs. As of March 31, 2024 and 2023, we had state NOLs of $628.9 million and $480.0 million, respectively, that will expire between fiscal 2025 and 2044 for most jurisdictions, if not utilized.

On March 3, 2021, the IRS notified us that our federal income tax returns for the tax years March 31, 2014, 2015, 2016, 2018 and 2019 were selected for examination. The examination eventually expanded to include all years March 31, 2012 through March 31, 2021. The examination was completed and report finalized in March 2024. As a result, we are owed $129 million, plus interest of $11.4 million, both of which are reflected in prepaid expense.

No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.

We account for uncertainty in income taxes by recognizing the tax benefit or expense from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits and expenses recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period are as follows:

		Unrecognized Tax Benefits
		March 31,
		2024				2023
		(In thousands)
Unrecognized tax benefits beginning balance	$		58,107		$		48,851
Additions based on tax positions related to the current year			10,202				7,226
Reductions for tax positions of prior years			(27,536	)			(443	)
Additions for tax provisions of prior years			41,203				2,473
Unrecognized tax benefits ending balance	$		81,976		$		58,107

Included in the balance of unrecognized tax benefits as of March 31, 2024 and March 31, 2023 are $64.8 million and $45.9 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

We recognize interest related to unrecognized tax benefits and penalties as income tax expenses. As of March 31, 2024 and 2023, the amount of interest accrued on unrecognized tax benefits was $9.6 million and $17.7 million, respectively, net of tax. During the current year, we recorded a benefit from interest in the amount of $8.1 million, net of tax. At March 31, 2024 and 2023, the amount of penalties accrued on unrecognized tax benefits was $20.2 million and $12.2 million. During the current year, we recorded expense from penalties in the amount of $8.0 million. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within 12 months of the reporting date.

We file income tax returns in the U.S. federal jurisdiction, and various states and Canadian jurisdictions. While the Company has ongoing audits in Canada and various state jurisdictions, there have been no proposed or anticipated adjustments that would materially impact the consolidated financial statements. Our tax years remain open for examination by federal authorities for three years, state authorities for three to four years and Canadian authorities for four years.

The Canadian government has issued draft Pillar Two legislation (Global Minimum Tax Act), including the Income Inclusion Rule and Qualified Domestic Minimum Top-Up Tax, which it intends to enact in 2024. The Canadian legislation is expected to be effective for our fiscal year beginning April 1, 2024. We have performed an assessment of the potential exposure to Pillar Two income taxes. Based on the assessment performed, the Pillar Two effective tax rates in all jurisdictions in which we operate are above the 15% minimum tax rate. We will continue to evaluate the legislation but do not expect the rules to have an impact on the income tax provision or cash taxes.

The Inflation Reduction Act of 2022 (the “IRA”) includes a 15% corporate alternative minimum tax on certain large corporations and a 1% excise tax on certain corporate stock repurchases. The impact on the Company of these provisions, which became effective on January 1, 2023, will depend on several factors, including recently released and forthcoming interpretive regulatory guidance. The Company continues to review and assess the provisions of the IRA but does not current expect it to materially impact the consolidated financial statements.