Income Taxes

3 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 11 — Income Taxes

For the three months ended June 30, 2023, the Company recorded an income tax benefit of an insignificant amount, resulting in an effective tax rate of 1%. The effective tax rate for the period differed from the U.S. statutory rate primarily due to the benefit of federal R&D tax credits offset by expense for non-deductible transaction costs related to the Inmarsat Acquisition.

For the three months ended June 30, 2022, the Company recorded an income tax benefit of $22.8 million, resulting in an effective tax rate of 37%. The effective tax rate for the period differed from the U.S. statutory rate primarily due to the benefit of federal R&D tax credits.

Future realization of existing deferred tax assets ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established, which would cause a decrease to income in the period such determination is made.

For the three months ended June 30, 2023, the Company’s gross unrecognized tax benefits increased by $73.3 million and interest and penalties increased by $21.1 million. Of the total increases, the gross unrecognized tax benefits of $65.0 million and interest and penalties of $21.5 million were recorded through goodwill as part of the purchase accounting for the Inmarsat Acquisition. Of the total $73.3 million gross unrecognized tax benefits increase for the quarter, $16.3 million would reduce the Company's annual effective tax rate if recognized. Along with the other acquired tax attributes and positions, the unrecognized tax benefits are subject to adjustments during the measurement period, which may be up to one year from the acquisition date. Any material adjustments based upon new information identified during the measurement period will be recorded as adjustments to goodwill.