INCOME TAXES

6 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The benefit from income taxes for the three months ended September 30, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred. The benefit from income taxes was $44.1 for the three months ended September 30, 2022, as compared to the provision for income taxes of $9.7 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 14.6% for the three months ended September 30, 2022 was due primarily to tax benefits of $8.5 from tax credits, tax benefits of $3.4 from employee stock-based compensation, and tax expense of $12.8 related to geographic mix of earnings.

The benefit from income taxes for the six months ended September 30, 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for specific items that are required to be recognized in the period in which they are incurred. The benefit from income taxes was $46.4 for the six months ended September 30, 2022, as compared to the provision for income taxes of $28.9 for the prior year period.

When compared to the statutory rate of 21%, the effective tax rate of 11.4% for the six months ended September 30, 2022 was due primarily to tax expense of $22.6 related to the geographic mix of earnings, tax expense of $6.0 from employee stock-based compensation, nondeductible expense of $8.2 related to the settlement of convertible debt, offset by benefits of $30.9 from tax credits.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) requires taxpayers to capitalize and amortize research and development costs pursuant to Internal Revenue Code ("IRC") Section 174. Although Congress is considering legislation that would defer the capitalization and amortization requirement to later years, we have no assurance that the requirement will be repealed or otherwise modified. The requirement was effective for the Company beginning April 1, 2022. For the six months ended September 30, 2022, we recorded an estimated increase to income tax payable and deferred tax assets of approximately $70.0 due to Section 174 capitalization. The actual impact of Section 174 capitalization and amortization on the income tax payable and deferred tax asset will depend on multiple factors, including the amount of research and development expenses we will incur and whether we conduct our research and development activities inside or outside the United States. If legislation is not passed to defer, repeal, or otherwise modify the capitalization and amortization requirement we expect our cash taxes payable and deferred tax assets to increase in the future.

In August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which includes a 15% book-income alternative minimum tax on corporations with average applicable financial statement income over $1 billion for any 3-year period ending with 2022 or later and a 1% excise tax on the fair market value of stock that is repurchased by publicly traded U.S. corporations or their specified affiliates. The alternative minimum tax and the excise tax are effective in taxable years beginning after December 31, 2022. We will continue to evaluate the potential impact of the Inflation Reduction Act may have on our operations and Consolidated Financial Statements in future periods.

We are regularly examined by domestic and foreign taxing authorities. Examinations may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe our tax positions comply with applicable tax law, and that we have adequately provided for reasonably foreseeable tax assessments. 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.