INCOME TAXES

12 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

    Components of income before income taxes are as follows:

	Fiscal Year Ended March 31,
	2022		2021		2020
Domestic	$	357,511	$	467,962	$	322,297
Foreign	107,887		209,854		136,142
Income before income taxes	$	465,398	$	677,816	$	458,439

    Provision for (benefit from) current and deferred income taxes consists of the following:

	Fiscal Year Ended March 31,
	2022		2021		2020
Current:
U.S. federal	$	12,004	$	18,417	$	26,561
U.S. state and local	(588)		6,030		3,575
Foreign	24,062		27,333		10,061
Total current income taxes	35,478		51,780		40,197
Deferred:
U.S. federal	34,764		43,642		45,079
U.S. state and local	2,926		1,070		1,317
Foreign	(25,792)		(7,562)		(32,613)
Total deferred income taxes	11,898		37,150		13,783
Provision for income taxes	$	47,376	$	88,930	$	53,980

A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:

	Fiscal Year Ended March 31,
	2022		2021		2020
U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of U.S. federal benefit	1.2	%	1.1	%	2.1	%
Foreign tax rate differential(1)	(1.8)	%	(2.9)	%	1.0	%
Foreign earnings(2)	(2.8)	%	(0.3)	%	(9.3)	%
Tax credits(3)	(6.6)	%	(4.3)	%	(8.3)	%
Excess tax benefits from stock-based compensation	(3.1)	%	(2.0)	%	(1.8)	%
Earn-out adjustments	2.1	%	—	%	—	%
Valuation allowance—domestic	(0.1)	%	0.1	%	0.2	%
Valuation allowance—foreign(2)	0.4	%	—	%	7.3	%
Change in reserves	(0.9)	%	(0.4)	%	(2.0)	%
Other	0.8	%	0.8	%	1.6	%
Effective tax rate	10.2	%	13.1	%	11.8	%

(1) The foreign rate differentials in relation to foreign earnings, for all periods presented, are primarily driven by changes in the mix of our foreign earnings and the difference between the foreign and U.S. income tax rates. Fiscal year ended March 31, 2020 includes the impact of the reversal of a net deferred tax asset of $19,826 related to the effects of stock-based compensation from our intercompany cost-sharing arrangements due to an appeals court decision issued in Altera Corp. v. Commissioner.

(2) Fiscal year ended March 31, 2022 includes effects of an increase of the deferred tax asset related to the Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020. Fiscal year ended March 31, 2020 includes effects of a deferred tax asset and valuation allowance associated with a tax basis step up received in Switzerland related to TRAF.

(3) Tax benefits were recorded for fiscal years ended March 31, 2022, 2021, and 2020 attributable to certain tax credits related to software development activities.

    The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:

	March 31,
	2022		2021
Deferred tax assets:
Accrued compensation expense	$	106,034	$	132,794
Equity-based compensation	88,407		60,012
Tax credit carryforward	71,600		54,576
Tax basis step up related to TRAF	58,462		45,266
Operating lease liabilities	54,310		42,846
Net operating loss carryforward	10,298		5,576
Deferred revenue	13,046		3,323
Business reorganization	628		401
Other	13,145		10,236
Total deferred tax assets	415,930		355,030
Less: Valuation allowance	(121,896)		(95,761)
Net deferred tax assets	$	294,034	$	259,269
Deferred tax liabilities:
Capitalized software and depreciation	$	(145,059)	$	(99,673)
Right of use assets	(50,012)		(40,391)
Intangible amortization	(45,104)		(29,683)
Deferred revenue	—		—
Other	(1,846)		(2,773)
Total deferred tax liabilities	(242,021)		(172,520)
Net deferred tax asset (1)	$	52,013	$	86,749

(1) As of March 31, 2022, $73,801 is included in Deferred tax assets and $21,788 is included in Other long-term liabilities. As of March 31, 2021, $90,206 is included in Deferred tax assets and $3,457 is included in Other long-term liabilities.

    The valuation allowance is primarily attributable to deferred tax assets for which no benefit is provided due to uncertainty with respect to their realization.

    At March 31, 2022, we had domestic net operating loss carryforwards totaling $32,955 of which $13,131 will expire in 2023 to 2028, $13,210 will expire from 2029 to 2032, and $6,614 will expire in 2035 to 2041. In addition, we had foreign net operating loss carryforwards of $39,074, of which $18,438 will expire from 2026 to 2028, $7,317 will expire from 2041 to 2042 and the remainder may be carried forward indefinitely.

    At March 31, 2022, we had domestic tax credit carryforwards totaling $194,517, of which $47,743 expire in 2039 to 2043, and the remainder may be carried forward indefinitely.

    The total amount of undistributed earnings of foreign subsidiaries was approximately $392,647 at March 31, 2022 and $419,887 at March 31, 2021. As of March 31, 2022, it is our intention to reinvest indefinitely undistributed earnings of our foreign subsidiaries. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability that would arise if these earnings were remitted.    

    We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions comply with applicable tax law and that we have adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse effect on our Consolidated Financial Statements. It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our effective tax rate in future periods.

    We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our Consolidated Statements of Operations. For the fiscal years ended March 31, 2022, 2021 and 2020, we recognized an increase of interest and penalties of $1,877, $2,594 and $71, respectively. The gross amount of interest and penalties accrued as of March 31, 2022 and 2021 was $11,228 and $9,351, respectively.

    As of March 31, 2022, we had gross unrecognized tax benefits, including interest and penalties, of $176,024, of which $65,781 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2022, gross unrecognized tax benefits increased by $8,464.

    We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2019 and state income tax returns for periods prior to the fiscal year ended March 31, 2018. With few exceptions, we are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2016. Certain U.S. state and foreign taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2015 through March 31, 2019.

    The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that a reduction of $8,817 of unrecognized tax benefits may occur within the next 12 months, some of which, depending on the nature of the settlement or expiration of statutes of limitations, may affect our income tax provision and therefore benefit the resulting effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.

    The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties, were as follows:

	Fiscal Year Ended March 31,
	2022		2021		2020
Balance, beginning of period	$	158,209	$	127,512	$	132,320
Additions:
Current year tax positions	10,346		18,861		8,596
Prior year tax positions	4,213		20,953		1,404
Reduction of prior year tax positions	—		(981)		(14,270)
Lapse of statute of limitations	(7,971)		(8,136)		(538)
Balance, end of period	$	164,797	$	158,209	$	127,512

    We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will not have a material adverse effect on our consolidated financial statements. However, there can be no assurances as to the possible outcomes.