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INCOME TAXES | 12 Months Ended
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Mar. 31, 2015
INCOME TAXES |
(4) |  | INCOME TAXES
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Earnings before income taxes derived from United States and non-U.S. operations for the years ended March 31, are as follows:
(In thousands) |  |  | 2015 |  |  |  | 2014 |  |  |  | 2013 |  |  |
Non-U.S. |  | $ | (38,282 | ) |  |  | 217,816 |  |  |  | 246,863 |  |  |
United States |  |  | (27,985 | ) |  |  | (44,768 | ) |  |  | (51,700 | ) |  |
|  | $ | (66,267 | ) |  |  | 173,048 |  |  |  | 195,163 |  |  |
Income tax expense (benefit) for the years ended March 31, consists of the following:
|  |  | U.S. |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  | Federal |  |  |  | State |  |  |  | International |  |  |  | Total |  |  |
2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 4,869 |  |  |  | (9 | ) |  |  | 66,452 |  |  |  | 71,312 |  |  |
Deferred |  |  | (72,389 | ) |  |  | — |  |  |  | — |  |  |  | (72,389 | ) |  |
|  | $ | (67,520 | ) |  |  | (9 | ) |  |  | 66,452 |  |  |  | (1,077 | ) |  |
2014 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | (602 | ) |  |  | 4 |  |  |  | 68,100 |  |  |  | 67,502 |  |  |
Deferred |  |  | (34,226 | ) |  |  | — |  |  |  | (483 | ) |  |  | (34,709 | ) |  |
|  | $ | (34,828 | ) |  |  | 4 |  |  |  | 67,617 |  |  |  | 32,793 |  |  |
2013 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | (7,633 | ) |  |  | (313 | ) |  |  | 64,092 |  |  |  | 56,146 |  |  |
Deferred |  |  | (11,335 | ) |  |  | — |  |  |  | (398 | ) |  |  | (11,733 | ) |  |
|  | $ | (18,968 | ) |  |  | (313 | ) |  |  | 63,694 |  |  |  | 44,413 |  |  |
The actual income tax expense above differs from the amounts computed by applying the U.S. federal statutory tax rate of 35% to pre-tax earnings as a result of the following for the years ended March 31:
(In thousands) |  |  | 2015 |  |  |  | 2014 |  |  |  | 2013 |  |  |
Computed “expected” tax expense |  | $ | (23,193 | ) |  |  | 60,567 |  |  |  | 68,307 |  |  |
Increase (reduction) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign income taxed at different rates |  |  | (13,570 | ) |  |  | (18,536 | ) |  |  | (23,965 | ) |  |
Foreign tax credits not previously recognized |  |  | — |  |  |  | (483 | ) |  |  | (398 | ) |  |
Expenses which are not deductible for tax purposes |  |  | 472 |  |  |  | 720 |  |  |  | 498 |  |  |
Non-deductible goodwill |  |  | 15,811 |  |  |  | 2,941 |  |  |  | — |  |  |
Reversal of basis difference – sale leaseback |  |  | — |  |  |  | (3,369 | ) |  |  | — |  |  |
Valuation allowance – deferred tax assets |  |  | 17,829 |  |  |  | (5,821 | ) |  |  | 5,821 |  |  |
Amortization of deferrals associated with intercompany sales to foreign tax jurisdictions |  |  | (2,358 | ) |  |  | (1,475 | ) |  |  | (6,232 | ) |  |
Expenses which are not deductible for book purposes |  |  | (832 | ) |  |  | (2,144 | ) |  |  | — |  |  |
Foreign taxes |  |  | 5,688 |  |  |  |  |  |  |  |  |  |  |
State taxes |  |  | (6 | ) |  |  | 3 |  |  |  | (203 | ) |  |
Other, net |  |  | (918 | ) |  |  | 390 |  |  |  | 585 |  |  |
|  | $ | (1,077 | ) |  |  | 32,793 |  |  |  | 44,413 |  |  |
Income taxes resulting from intercompany vessel sales, as well as the tax effect of any reversing temporary differences resulting from the sales, are deferred and amortized on a straight-line basis over the remaining useful lives of the vessels. The company is not liable for U.S. taxes on undistributed earnings of most of its non-U.S. subsidiaries and business ventures that it considers indefinitely reinvested abroad because the company adopted the provisions of the American Jobs Creation Act of 2004 (the Act) effective April 1, 2005. All previously recorded deferred tax assets and liabilities related to temporary differences, foreign tax credits, or prior undistributed earnings of these entities whose future and prior earnings were anticipated to be indefinitely reinvested abroad were reversed in March 2005. The effective tax rate applicable to pre-tax earnings for the years ended March 31, is as follows:
|  |  | 2015 |  |  |  | 2014 |  |  |  | 2013 |  |  |
Effective tax rate applicable to pre-tax earnings |  |  | 1.63 | % |  |  | 18.95 | % |  |  | 22.76 | % |  |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, is as follows:
(In thousands) |  |  | 2015 |  |  |  | 2014 |  |  |
Deferred tax assets: |  |  |  |  |  |  |  |  |  |
Accrued employee benefit plan costs |  | $ | 21,874 |  |  |  | 21,423 |  |  |
Stock based compensation |  |  | 8,731 |  |  |  | 7,162 |  |  |
Net operating loss and tax credit carryforwards |  |  | 2,327 |  |  |  | 2,895 |  |  |
Other |  |  | 3,901 |  |  |  | 2,896 |  |  |
Gross deferred tax assets |  |  | 36,833 |  |  |  | 34,376 |  |  |
Less valuation allowance |  |  | (17,829 | ) |  |  | — |  |  |
Net deferred tax assets |  |  | 19,004 |  |  |  | 34,376 |  |  |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | (19,004 | ) |  |  | (108,929 | ) |  |
Gross deferred tax liabilities |  |  | (19,004 | ) |  |  | (108,929 | ) |  |
Net deferred tax assets (liabilities) |  | $ | — |  |  |  | (74,553 | ) |  |
Management assesses the available positive and negative evidence to estimate whether sufficient future U.S. taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss for financial reporting purposes of domestic corporations that was incurred over the three-year period ended March 31, 2015. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth and tax planning strategies. On the basis of this evaluation, as of March 31, 2015, a valuation allowance of $17,829 has been recorded against net deferred tax assets which are not more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future U.S. taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth and/or tax planning strategies. The company has not recognized a U.S. deferred tax liability associated with temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration. The differences relate primarily to undistributed earnings and stock basis differences. Though the company does not anticipate repatriation of funds, a current U.S. tax liability would be recognized when the company receives those foreign funds in a taxable manner such as through receipt of dividends or sale of investments. A determination of the unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries is not practicable due to uncertainty regarding the use of foreign tax credits which would become available as a result of a transaction. The amount of foreign income that U.S. deferred taxes has not been recognized upon, as of March 31, is as follows:
(In thousands) |  |  | 2015 |  |  |
Foreign income not recognized for U.S. deferred taxes |  | $ | 2,578,133 |  |  |
The company has the following foreign tax credit carry-forwards that expire in 2022.
(In thousands) |  |  | 2015 |  |  |
Foreign tax credit carry-forwards |  | $ | 2,327 |  |  |
The company’s balance sheet reflects the following in accordance with ASC 740, Income Taxes at March 31:
(In thousands) |  |  | 2015 |  |  |  | 2014 |  |  |
Tax liabilities for uncertain tax positions |  | $ | 16,305 |  |  |  | 18,008 |  |  |
Income tax payable |  |  | 44,607 |  |  |  | 36,472 |  |  |
Included in the liability balances for uncertain tax positions above are $8.3 million of penalties and interest. The tax liabilities for uncertain tax positions are primarily attributable to a permanent establishment issue related to a foreign joint venture. Penalties and interest related to income tax liabilities are included in income tax expense. Income tax payable is included in other current liabilities. Unrecognized tax benefits, which are not included in the liability for uncertain tax positions above as they have not been recognized in previous tax filings, and which would lower the effective tax rate if realized, at March 31, are as follows:
(In thousands) |  |  | 2015 |  |  |
Unrecognized tax benefit related to state tax issues |  | $ | 11,685 |  |  |
Interest receivable on unrecognized tax benefit related to state tax issues |  |  | 32 |  |  |
A reconciliation of the beginning and ending amount of all unrecognized tax benefits, including the unrecognized tax benefit related to state tax issues and the liability for uncertain tax positions (but excluding related penalties and interest) for the years ended March 31, are as follows:
(In thousands) |  |  | 2015 |  |  |  | 2014 |  |  |  | 2013 |  |  |
Balance at April 1, |  | $ | 20,066 |  |  |  | 14,868 |  |  |  | 15,727 |  |  |
Additions based on tax positions related to the current year |  |  | 1,342 |  |  |  | 4,393 |  |  |  | 2,041 |  |  |
Additions based on tax positions related to prior years |  |  | — |  |  |  | 2,217 |  |  |  | — |  |  |
Reductions for tax positions of prior years |  |  | — |  |  |  | — |  |  |  | — |  |  |
Exchange rate fluctuation |  |  | — |  |  |  | — |  |  |  | — |  |  |
Settlement and lapse of statute of limitations |  |  | (1,710 | ) |  |  | (1,412 | ) |  |  | (2,900 | ) |  |
Balance at March 31, |  | $ | 19,698 |  |  |  | 20,066 |  |  |  | 14,868 |  |  |
With limited exceptions, the company is no longer subject to tax audits by United States (U.S.) federal, state, local or foreign taxing authorities for years prior to 2007. The company has ongoing examinations by various state and foreign tax authorities and does not believe that the results of these examinations will have a material adverse effect on the company’s financial position or results of operations. The company receives a tax benefit that is generated by certain employee stock benefit plan transactions. This benefit is recorded directly to additional paid-in-capital and does not reduce the company’s effective income tax rate. The tax benefit for the years ended March 31, are as follows:
(In thousands) |  |  | 2015 |  |  |  | 2014 |  |  |  | 2013 |  |  |
Excess tax benefits on stock benefit transactions |  | $ | (1,784 | ) |  |  | 301 |  |  |  | 359 |  |  |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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