Income Taxes (Notes)

9 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes reflects tax on foreign earnings and federal and state tax on U.S. earnings.  The Company had an effective tax rate benefit of 14.7% for the nine-month period ended December 31, 2015 and an effective tax rate of 6.0% for the nine-month period ended December 31, 2014.  The Company's effective tax rate for the nine-month period ended December 31, 2015 is lower compared to the prior year primarily due to the favorable tax impact from the integration of previously acquired intangible assets. The Company's effective tax rate is lower than statutory rates in the U.S. due primarily to its mix of earnings in foreign jurisdictions with lower tax rates.

In December 2015, legislation was enacted which retroactively extends the research and experimentation tax credit on a permanent basis. As a result of the law change, the Company recorded a one-time tax benefit of $2.7 million in the three month period ended December 31, 2015, related to research activities incurred during fiscal year 2015. Likewise, the ongoing benefit from this credit is reflected in the Company's effective tax rate beginning in the three month period ended December 31, 2015.

At December 31, 2015, the Company had $257.6 million of unrecognized tax benefits.  Unrecognized tax benefits increased by $58.7 million compared to March 31, 2015. The current year increase is composed of $18.8 million related to acquisitions, $38.6 million related to ongoing accruals and releases, and $1.1 million related to deficiency interest on the positions. The majority of the increase in the uncertain tax position does not result in a change in the Company's effective tax rate for the current year.

The Company files U.S. federal, U.S. state, and foreign income tax returns.  For U.S. federal, and in general for U.S. state tax returns, the fiscal 2011 and later tax years remain open for examination by tax authorities.  The U.S. Internal Revenue Service (IRS) is currently auditing Microchip's 2011 and 2012 tax years.  For foreign tax returns, the Company is generally no longer subject to income tax examinations for years prior to fiscal 2007.

The Company recognizes liabilities for anticipated tax audit issues in the U.S. and other domestic and international tax jurisdictions based on its estimate of whether, and the extent to which, additional tax payments are more likely than not.  The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter.

The Company believes it maintains appropriate reserves to offset any potential income tax liabilities that may arise upon final resolution of matters for open tax years.  If such reserve amounts ultimately prove to be unnecessary, the resulting reversal of such reserves would result in tax benefits being recorded in the period the reserves are no longer deemed necessary.  If such amounts prove to be less than an ultimate assessment, a future charge to expense would be recorded in the period in which the assessment is determined.  Although the timing of the resolution and/or closure of audits is highly uncertain, the Company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.