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Income Taxes | 12 Months Ended
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Mar. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | (10) INCOME TAXES The components of our income before provision for (benefit from) income taxes for the fiscal years ended March 31, 2020, 2019 and 2018 are as follows (in millions):
| Year Ended March 31, |  |  |  |
| 2020 |  | 2019 |  | 2018
Domestic | $ | 380 |  |  | $ | 170 |  |  | $ | 440 |
Foreign | 1,128 |  |  | 909 |  |  | 1,009 |
Income before provision for (benefit from) income taxes | $ | 1,508 |  |  | $ | 1,079 |  |  | $ | 1,449 |
Provision for (benefit from) income taxes for the fiscal years ended March 31, 2020, 2019 and 2018 consisted of (in millions):
| Current |  | Deferred |  | Total
Year Ended March 31, 2020 |  |  |  |  |
Federal | $ | 258 |  |  | $ | (14) |  |  | $ | 244 |
State | 39 |  |  | (2) |  |  | 37 |
Foreign | 48 |  |  | (1,860) |  |  | (1,812) |
| $ | 345 |  |  | $ | (1,876) |  |  | $ | (1,531) |
Year Ended March 31, 2019 |  |  |  |  |
Federal | $ | 29 |  |  | $ | (18) |  |  | $ | 11 |
State | 5 |  |  | — |  |  | 5 |
Foreign | 42 |  |  | 2 |  |  | 44 |
| $ | 76 |  |  | $ | (16) |  |  | $ | 60 |
Year Ended March 31, 2018 |  |  |  |  |
Federal | $ | 138 |  |  | $ | 197 |  |  | $ | 335 |
State | 4 |  |  | 9 |  |  | 13 |
Foreign | 61 |  |  | (3) |  |  | 58 |
| $ | 203 |  |  | $ | 203 |  |  | $ | 406 |
The differences between the statutory tax rate and our effective tax rate, expressed as a percentage of income before provision for (benefit from) income taxes, for the fiscal years ended March 31, 2020, 2019 and 2018 were as follows:
| Year Ended March 31, |  |  |  |
| 2020 |  | 2019 |  | 2018
Statutory federal tax expense rate | 21.0 | % |  | 21.0 | % |  | 31.5 | %
State taxes, net of federal benefit | 1.0 | % |  | 0.7 | % |  | 0.8 | %
Differences between statutory rate and foreign effective tax rate | (8.4) | % |  | (14.4) | % |  | (19.1) | %
Tax reform | — | % |  | (0.4) | % |  | 16.2 | %
Excess tax benefit | (0.1) | % |  | (1.9) | % |  | (3.0) | %
Research and development credits | (1.2) | % |  | (2.4) | % |  | (1.4) | %
Swiss Deferred Tax Asset | (122.1) | % |  | — | % |  | — | %
The Altera opinion | 5.4 | % |  | — | % |  | — | %
Non-deductible stock-based compensation | 2.3 | % |  | 2.3 | % |  | 2.7 | %
Other | 0.6 | % |  | 0.7 | % |  | 0.3 | %
Effective tax rate | (101.5) | % |  | 5.6 | % |  | 28.0 | %
Our effective tax rate and resulting provision for income taxes for the fiscal year ended March 31, 2020 were significantly impacted by the Swiss Deferred Tax Asset. During the fiscal year ended March 31, 2020, we recognized total one-time tax benefits of $1.760 billion related to the $1.840 billion Swiss Deferred Tax Asset, partially offset by the $80 million one-time Altera opinion charge. We generated income in lower tax jurisdictions primarily related to our European, Latin American, and Asia Pacific businesses that are headquartered in Switzerland. Our effective tax rate and resulting provision for income taxes for the fiscal year ended March 31, 2018 were significantly impacted by the U.S. Tax Cuts and Jobs Act (the “U.S. Tax Act”), enacted on December 22, 2017. The U.S. Tax Act significantly revised the U.S. corporate income tax system by, among other things, lowering U.S. corporate income tax rate to 21 percent, generally implementing a territorial tax system and imposing a one-time transition tax on the deemed repatriation of undistributed earnings of foreign subsidiaries (the “Transition Tax”). Our foreign subsidiaries will generally be subject to U.S. tax, and to the extent earnings from these subsidiaries can be repatriated without a material tax cost, such earnings will not be indefinitely reinvested. As of March 31, 2020, approximately $4.4 billion of our cash, cash equivalents, and short-term investments were domiciled in foreign tax jurisdictions, of which approximately $2.7 billion is available for immediate repatriation without a material tax cost. The components of net deferred tax assets, as of March 31, 2020 and 2019 consisted of (in millions):
| As of March 31, |  |
| 2020 |  | 2019
Deferred tax assets: |  |  |
Accruals, reserves and other expenses | $ | 141 |  |  | $ | 101 |
Tax credit carryforwards | 137 |  |  | 140 |
Stock-based compensation | 37 |  |  | 33 |
Net operating loss and capital loss carryforwards | 195 |  |  | 22 |
Swiss intra-entity tax asset | 1,818 |  |  | — |
Total | 2,328 |  |  | 296 |
Valuation allowance | (288) |  |  | (162) |
Deferred tax assets, net of valuation allowance | 2,040 |  |  | 134 |
Deferred tax liabilities: |  |  |
Amortization and depreciation | (85) |  |  | (28) |
ASC 606 Revenue Recognition | (43) |  |  | (66) |
Other | (10) |  |  | (7) |
Total | (138) |  |  | (101) |
Deferred tax assets, net of valuation allowance and deferred tax liabilities | $ | 1,902 |  |  | $ | 33 |
As of March 31, 2020, the ending Swiss intra-entity tax asset balance is $1.818 billion, which is net of a $393 million reduction due to the Altera opinion. As of March 31, 2020, we maintained a total valuation allowance of $288 million related to certain U.S. state deferred tax assets, Swiss deferred tax assets, and foreign capital loss carryovers, due to uncertainty about the future realization of these assets. Every quarter, we perform a realizability analysis to evaluate whether it is more likely than not that all or a portion of our deferred tax assets will not be realized. As of March 31, 2020, we have recognized a $131 million valuation allowance related to our Swiss deferred tax assets. Our Swiss deferred tax assets realizability analysis relies upon future Swiss taxable income as the primary source of taxable income but considers all available sources of Swiss income based on the positive and negative evidence. We give more weight to evidence that can be objectively verified. However, there is significant judgment involved in estimating future Swiss taxable income over the 20-year period over which the Swiss deferred tax assets will reverse, specifically related to assumptions about expected growth rates of future Swiss taxable income, which are based primarily on third party market and industry growth data. Actual results that differ materially from those estimates could have a material impact on our valuation allowance assessment. Although objectively verifiable, Swiss interest rates have an impact on the valuation allowance and are based on published Swiss guidance. Any significant changes to such interest rates could result in a material impact to the valuation allowance. Switzerland has a seven-year carryforward period and does not permit the carry back of losses. We do not recognize any deferred taxes related to the U.S. taxes on foreign earnings as we recognize these taxes as a period cost. As of March 31, 2020, we have net operating loss carry forwards of approximately $1.5 billion of which approximately $5 million is attributable to various acquired companies. These carryforwards, if not fully realized, will begin to expire in 2027. Switzerland has a seven-year carryforward period and does not permit the carry back of losses. We also have California and Canada tax credit carryforwards of $131 million and $5 million, respectively. The California and Canada tax credit carryforwards can be carried forward indefinitely. The total unrecognized tax benefits as of March 31, 2020, 2019 and 2018 were $983 million, $417 million and $457 million, respectively. A reconciliation of the beginning and ending balance of unrecognized tax benefits is summarized as follows (in millions):
Balance as of March 31, 2017 | $ | 389 |
Increases in unrecognized tax benefits related to prior year tax positions | 10 |
Decreases in unrecognized tax benefits related to prior year tax positions | (12) |
Increases in unrecognized tax benefits related to current year tax positions | 75 |
Decreases in unrecognized tax benefits related to settlements with taxing authorities | (7) |
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (2) |
Changes in unrecognized tax benefits due to foreign currency translation | 4 |
Balance as of March 31, 2018 | 457 |
Increases in unrecognized tax benefits related to prior year tax positions | — |
Decreases in unrecognized tax benefits related to prior year tax positions | (41) |
Increases in unrecognized tax benefits related to current year tax positions | 43 |
Decreases in unrecognized tax benefits related to settlements with taxing authorities | (16) |
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (21) |
Changes in unrecognized tax benefits due to foreign currency translation | (5) |
Balance as of March 31, 2019 | 417 |
Increases in unrecognized tax benefits related to prior year tax positions | 111 |
Decreases in unrecognized tax benefits related to prior year tax positions | (4) |
Increases in unrecognized tax benefits related to current year tax positions | 468 |
Decreases in unrecognized tax benefits related to settlements with taxing authorities | — |
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (5) |
Changes in unrecognized tax benefits due to foreign currency translation | (4) |
Balance as of March 31, 2020 | $ | 983 |
As of March 31, 2020, approximately $722 million of the unrecognized tax benefits would affect our effective tax rate, a portion of which would be impacted by a valuation allowance. Interest and penalties related to estimated obligations for tax positions taken in our tax returns are recognized in income tax expense in our Consolidated Statements of Operations. The combined amount of accrued interest and penalties related to tax positions taken on our tax returns and included in non-current other liabilities was approximately $34 million as of March 31, 2020 and $17 million as of March 31, 2019. We file income tax returns in the United States, including various state and local jurisdictions. Our subsidiaries file tax returns in various foreign jurisdictions, including Sweden, Italy, Canada, France, Germany, Switzerland and the United Kingdom. We remain subject to income tax examination by the IRS for fiscal years after 2015. In addition, as of the period ended March 31, 2020, we remain subject to income tax examination for several other jurisdictions including in Sweden for fiscal years after 2013, Italy for fiscal years after 2015, Germany for fiscal years after 2012, France for fiscal years after 2016, the United Kingdom for fiscal years after 2017, Canada for fiscal years after 2012, and Switzerland for fiscal years after 2010. We are also currently under income tax examination in the United States for fiscal year 2017, Germany for fiscal years 2013 through 2016, Sweden for fiscal years 2016 through 2017, and Italy for fiscal year 2016. We are subject to income tax examinations in various jurisdictions with respect to fiscal years after 2010. The timing and potential resolution of income tax examinations is highly uncertain. While we continue to measure our uncertain tax positions, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued. A final determination of Altera is reasonably possible within the next 12 months. If the Altera opinion stands, it would result in a $541 million reduction of our gross unrecognized tax benefits; approximately $148 million of which relates to gross U.S. uncertain tax positions recognized as of March 31, 2020 and approximately $393 million of which reduced the Swiss Deferred Tax Asset recognized as of March 31, 2020. It is also reasonably possible that an additional reduction of up to $25 million of unrecognized tax benefits may occur within the next 12 months, unrelated to the Altera opinion, a portion of which would impact our effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements and tax interpretations.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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