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Income Taxes | 12 Months Ended
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Mar. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The components of our income before provision for income taxes for the fiscal years ended March 31, 2024, 2023, and 2022 are as follows (in millions):
| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
Domestic | $ | 437 |  |  | $ | 315 |  |  | $ | 204 |
Foreign | 1,152 |  |  | 1,011 |  |  | 877 |
Income before provision for income taxes | $ | 1,589 |  |  | $ | 1,326 |  |  | $ | 1,081 |
Provision for income taxes for the fiscal years ended March 31, 2024, 2023, and 2022 consisted of (in millions):
| Current |  | Deferred |  | Total
Year Ended March 31, 2024 |  |  |  |  |
Federal | $ | 138 |  |  | $ | 85 |  |  | $ | 223 |
State | 20 |  |  | 9 |  |  | 29 |
Foreign | 76 |  |  | (12) |  |  | 64 |
| $ | 234 |  |  | $ | 82 |  |  | $ | 316 |
Year Ended March 31, 2023 |  |  |  |  |
Federal | $ | 570 |  |  | $ | (339) |  |  | $ | 231 |
State | 92 |  |  | (76) |  |  | 16 |
Foreign | 75 |  |  | 202 |  |  | 277 |
| $ | 737 |  |  | $ | (213) |  |  | $ | 524 |
Year Ended March 31, 2022 |  |  |  |  |
Federal | $ | 203 |  |  | $ | (190) |  |  | $ | 13 |
State | 36 |  |  | (26) |  |  | 10 |
Foreign | 381 |  |  | (112) |  |  | 269 |
| $ | 620 |  |  | $ | (328) |  |  | $ | 292 |
The differences between the statutory tax rate and our effective tax rate, expressed as a percentage of income before provision for income taxes, for the fiscal years ended March 31, 2024, 2023, and 2022 were as follows:
| Year Ended March 31,
| 2024 |  | 2023 |  | 2022
Statutory federal tax expense rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit | 1.1 | % |  | 1.1 | % |  | 1.9 | %
Differences between statutory rate and foreign effective tax rate | 2.9 | % |  | 7.6 | % |  | 6.8 | %
Excess tax benefit from equity compensation | (0.3) | % |  | (0.3) | % |  | (1.2) | %
Research and development credits | (2.4) | % |  | (3.0) | % |  | (2.8) | %
Swiss valuation allowance | (0.3) | % |  | 8.9 | % |  | 2.7 | %
Effect of change in enacted tax rate | (5.8) | % |  | — | % |  | — | %
Acquired IP intra-entity sales | — | % |  | — | % |  | (5.9) | %
Non-deductible stock-based compensation | 2.8 | % |  | 3.2 | % |  | 3.8 | %
Other | 0.9 | % |  | 1.0 | % |  | 0.7 | %
Effective tax rate | 19.9 | % |  | 39.5 | % |  | 27.0 | %
During the fiscal year ended March 31, 2024, we recognized a $92 million tax benefit to remeasure our Swiss deferred tax assets as a result of an increase in the Swiss statutory tax rate. In addition, we recognized a lower period cost for U.S. tax on our non-U.S. earnings, including a cumulative one-time benefit, due to R&D capitalization guidance issued by the U.S. Treasury during the fiscal year. Excluding the effects of these items, the effective tax rate for fiscal year 2024 would have been 29.5%. During the fiscal year ended March 31, 2023, we recognized a $118 million tax charge to increase the valuation allowance on Swiss deferred tax assets, primarily as a result of an increase in Swiss interest rates. During the fiscal year ended March 31, 2022, we completed intra-entity sales of intellectual property rights related to acquisitions to our U.S. and Swiss intellectual property owners (the “Acquired IP intra-entity sales”). The transactions resulted in overall taxable gains. Under U.S. GAAP, any profit resulting from the Acquired IP intra-entity sales was eliminated upon consolidation. However, the transactions resulted in a step-up of the U.S. and Swiss tax-deductible basis in the transferred intellectual property rights and, accordingly, created a temporary difference between the book basis and the tax basis of such intellectual property rights. As a result, we recognized a $64 million net tax benefit for the current and deferred tax impacts of the sales. In addition, during the fiscal year ended March 31, 2022, we recognized a $29 million tax charge to increase the valuation allowance on Swiss deferred tax assets that are not more likely than not to be realized. Our foreign subsidiaries are generally 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, 2024, approximately $1.1 billion of our cash and cash equivalents were domiciled in foreign tax jurisdictions. All of our foreign cash is available for repatriation without a material tax cost. The components of net deferred tax assets, as of March 31, 2024 and 2023 consisted of (in millions):
| As of March 31,
| 2024 |  | 2023
Deferred tax assets: |  |  |
Accruals, reserves and other expenses | $ | 200 |  |  | $ | 197 |
Tax credit carryforwards | 222 |  |  | 218 |
Research and development capitalization | 375 |  |  | 461 |
Stock-based compensation | 41 |  |  | 39 |
Net operating loss and capital loss carryforwards | 403 |  |  | 371 |
Swiss intra-entity tax asset | 1,618 |  |  | 1,665 |
Total | 2,859 |  |  | 2,951 |
Valuation allowance | (464) |  |  | (446) |
Deferred tax assets, net of valuation allowance | 2,395 |  |  | 2,505 |
Deferred tax liabilities: |  |  |
Amortization and depreciation | (10) |  |  | (41) |
Other | (6) |  |  | (3) |
Total | (16) |  |  | (44) |
Deferred tax assets, net of valuation allowance and deferred tax liabilities | $ | 2,379 |  |  | $ | 2,461 |
As of March 31, 2024, we have net operating loss carry forwards of approximately $2.8 billion of which approximately $91 million is attributable to various acquired companies. The net operating loss carry forwards include $2.6 billion related to Switzerland and $94 million related to California. Substantially all of these carryforwards, if not fully realized, will begin to expire in fiscal year 2027. Switzerland has a seven-year carryforward period and does not permit the carry back of losses. We also have U.S. federal credit carryforwards of $8 million and California credit carryforwards of $204 million. The California tax credit carryforwards can be carried forward indefinitely. As of March 31, 2024, we maintained a total valuation allowance of $464 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. The total unrecognized tax benefits as of March 31, 2024, 2023, and 2022 were $804 million, $867 million and $636 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, 2021 | $ | 584 |
Increases in unrecognized tax benefits related to prior year tax positions | 5 |
Decreases in unrecognized tax benefits related to prior year tax positions | (21) |
Increases in unrecognized tax benefits related to current year tax positions | 139 |
Decreases in unrecognized tax benefits related to settlements with taxing authorities | (50) |
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (18) |
Changes in unrecognized tax benefits due to foreign currency translation | (3) |
Balance as of March 31, 2022 | 636 |
Increases in unrecognized tax benefits related to current year tax positions | 245 |
Decreases in unrecognized tax benefits related to settlements with taxing authorities | (2) |
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (6) |
Changes in unrecognized tax benefits due to foreign currency translation | (6) |
Balance as of March 31, 2023 | 867 |
Increases in unrecognized tax benefits related to prior year tax positions | 14 |
Decreases in unrecognized tax benefits related to prior year tax positions | (173) |
Increases in unrecognized tax benefits related to current year tax positions | 97 |
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations | (2) |
Changes in unrecognized tax benefits due to foreign currency translation | 1 |
Balance as of March 31, 2024 | $ | 804 |
As of March 31, 2024, approximately $441 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 $82 million as of March 31, 2024 and $54 million as of March 31, 2023. We file income tax returns in the United States, including various state and local jurisdictions. As of March 31, 2024, our subsidiaries file tax returns in various foreign jurisdictions, including Canada, Germany, South Korea, Switzerland, and the United Kingdom. As of the period ended March 31, 2024, we remain subject to income tax examination in these jurisdictions, including the United States for fiscal years after 2017, Canada for fiscal years after 2013, Germany for fiscal years after 2016, South Korea for fiscal years after 2018, Switzerland for fiscal years after 2014, and the United Kingdom for fiscal years after 2021. We are currently under income tax examination in various jurisdictions, including the United States for fiscal years 2018 through 2020, and Germany for fiscal years 2013 through 2019. 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. It is also reasonably possible that an additional immaterial reduction of unrecognized tax benefits may occur within the next 12 months, 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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