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INCOME TAXES | 12 Months Ended
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Mar. 31, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Components of Loss before income taxes are as follows:
|  | Fiscal Year Ended March 31,
|  | 2025 |  | 2024 |  | 2023
Domestic |  | $ | (2,471.1) |  |  | $ | (2,081.8) |  |  | $ | (937.0) |
Foreign |  | (2,020.2) |  |  | (1,621.0) |  |  | (401.1) |
Loss before income taxes |  | $ | (4,491.3) |  |  | $ | (3,702.8) |  |  | $ | (1,338.1) |
(Benefit from) provision for current and deferred income taxes consists of the following:
|  | Fiscal Year Ended March 31,
|  | 2025 |  | 2024 |  | 2023
Current: |  |  |  |  |  |
U.S. federal |  | $ | 0.2 |  |  | $ | 23.0 |  |  | $ | 70.2 |
U.S. state and local |  | 11.5 |  |  | 12.4 |  |  | 3.3 |
Foreign |  | 115.0 |  |  | 107.5 |  |  | 98.0 |
Total current income taxes |  | 126.7 |  |  | 142.9 |  |  | 171.5 |
Deferred: |  |  |  |  |  |
U.S. federal |  | (55.3) |  |  | 24.6 |  |  | (175.4) |
U.S. state and local |  | — |  |  | (22.6) |  |  | (31.4) |
Foreign |  | (83.8) |  |  | (103.5) |  |  | (178.1) |
Total deferred income taxes |  | (139.1) |  |  | (101.5) |  |  | (384.9) |
(Benefit from) provision for income taxes |  | $ | (12.4) |  |  | $ | 41.4 |  |  | $ | (213.4) |
A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate is as follows:
|  | Fiscal Year Ended March 31,
|  | 2025 |  | 2024 |  | 2023
U.S. federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State and local taxes, net of U.S. federal benefit |  | 0.4 | % |  | 0.6 | % |  | 2.0 | %
Foreign tax rate differential(1) |  | (0.2) | % |  | 0.2 | % |  | (0.3) | %
Foreign earnings(2) |  | (0.5) | % |  | (1.5) | % |  | (1.3) | %
Tax credits(3) |  | 1.2 | % |  | 1.7 | % |  | 5.7 | %
Excess tax benefits from stock-based compensation |  | 0.2 | % |  | (0.1) | % |  | (0.5) | %
Earn-out adjustments |  | — | % |  | 0.1 | % |  | (0.4) | %
Valuation allowance—domestic(4) |  | (5.0) | % |  | (9.1) | % |  | (6.3) | %
Valuation allowance—foreign(4) |  | (0.6) | % |  | (1.1) | % |  | (0.1) | %
Nondeductible compensation |  | (0.1) | % |  | (0.1) | % |  | (0.9) | %
Global intangible low-taxed income |  | (0.5) | % |  | (1.0) | % |  | (3.1) | %
Foreign-derived intangible income |  | 0.3 | % |  | 0.5 | % |  | 1.8 | %
Change in reserves |  | — | % |  | 0.9 | % |  | (0.1) | %
Goodwill impairment |  | (16.0) | % |  | (12.8) | % |  | — | %
Other(5) |  | 0.1 | % |  | (0.4) | % |  | (1.6) | %
Effective tax rate |  | 0.3 | % |  | (1.1) | % |  | 15.9 | %
(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. (2) Fiscal year ended March 31, 2024 includes tax expense of $29.2 from a decrease in the deferred tax assets related to Switzerland's Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020. Fiscal year ended March 31, 2023 includes a tax benefit of $5.6 from the effects of an increase in the deferred tax asset. (3) Tax benefits were recorded for fiscal years ended March 31, 2025, 2024, and 2023 attributable to certain tax credits related to software development activities. (4) The change in domestic and foreign valuation allowance includes an increase in our valuation allowance on deferred tax assets as a result of a determination in the fiscal years ended March 31, 2025 and 2024 that it was more likely than not that such deferred tax assets would not be realized. (5) For the fiscal year ended March 31, 2023, includes nondeductible expense of $8.2 relating to loss on the redemption of convertible debt The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:
|  | March 31,
|  | 2025 |  | 2024
Deferred tax assets: |  |  |  |
Capitalized development costs, software and depreciation |  | $ | 440.6 |  |  | $ | 365.1 |
Tax credit carryforward |  | 232.5 |  |  | 174.4 |
Equity-based compensation |  | 158.3 |  |  | 143.0 |
Tax basis step up related to TRAF |  | 131.1 |  |  | 131.1 |
Net operating loss carryforward |  | 104.1 |  |  | 63.2 |
Operating lease liabilities |  | 100.2 |  |  | 101.9 |
Accrued compensation expense |  | 79.7 |  |  | 72.6 |
Disallowed interest |  | 20.8 |  |  | — |
Deferred revenue |  | 2.8 |  |  | — |
Business reorganization |  | 1.1 |  |  | 1.0 |
Other |  | 10.7 |  |  | 1.7 |
Total deferred tax assets |  | 1,281.9 |  |  | 1,054.0 |
Less: Valuation allowance |  | (1,127.0) |  |  | (799.1) |
Net deferred tax assets |  | $ | 154.9 |  |  | $ | 254.9 |
Deferred tax liabilities: |  |  |  |
Intangible amortization |  | $ | (338.1) |  |  | $ | (513.2) |
Right-of-use assets |  | (76.3) |  |  | (75.7) |
Deferred revenue |  | — |  |  | (5.0) |
Total deferred tax liabilities |  | (414.4) |  |  | (593.9) |
Net deferred tax liability(1) |  | $ | (259.5) |  |  | $ | (339.0) |
(1) As of March 31, 2025, $0.1 is included in Deferred tax assets, included within Prepaid expenses and other on our Consolidated Balance Sheets, and $259.6 is included in Deferred tax liabilities, net. As of March 31, 2024, $1.9 is included in Deferred tax assets, included within Other asset on our Consolidated Balance Sheets, and $340.9 is included in Deferred tax liabilities, net. We assess the realizability of the deferred tax assets based on the available positive and negative evidence in order to determine the amount which is more likely than not to be realized and record a valuation allowance as necessary. Due to our cumulative loss position, which provides significant negative evidence, we recognized a tax expense of $248.2 from an increase in our valuation allowance on U.S. and foreign deferred tax assets, as a result of a determination that it was more likely than not that such deferred tax assets would not be realized. The remaining net deferred tax liability is primarily related to a basis difference in intangibles as a result of the acquisition of Zynga in May 2022. At March 31, 2025, we had domestic net operating loss carryforwards totaling $548.9 of which $35.9 will expire from 2026 to 2029, $190.7 will expire from 2030 to 2040, $178.4 will expire from 2041 to 2044, and the remainder will be carried forward indefinitely. In addition, we had foreign net operating loss carryforwards of $286.4, of which $197.8 will expire from 2026 to 2032, $15.9 will expire from 2042 to 2044 and the remainder may be carried forward indefinitely. At March 31, 2025, we had domestic tax credit carryforwards totaling $436.4, of which $0.2 expire in 2026 to 2028, $104.5 expire from 2043 to 2046, and the remainder may be carried forward indefinitely. In addition, we had international tax credits of $12.0 which will expire from 2034 to 2042. The total amount of undistributed earnings of foreign subsidiaries was approximately $180.5 at March 31, 2025 and $492.5 at March 31, 2024. As of March 31, 2025, 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, 2025, 2024, and 2023, we recognized an increase of interest and penalties of $14.8, $13.5, and $8.9, respectively. The gross amount of interest and penalties accrued as of March 31, 2025 and 2024 was $48.4 and $33.6, respectively. As of March 31, 2025, we had gross unrecognized tax benefits, including interest and penalties, of $267.1, of which $109.5 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2025, gross unrecognized tax benefits decreased by $9.3. We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2022 and state income tax returns for periods prior to the fiscal year ended March 31, 2020. 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, 2018. Certain U.S. federal, state and foreign taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2016 through March 31, 2023. 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 $7.4 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,
|  | 2025 |  | 2024 |  | 2023
Balance, beginning of period |  | $ | 242.8 |  |  | $ | 274.7 |  |  | $ | 164.8 |
Additions: |  |  |  |  |  |
Current year tax positions |  | 63.6 |  |  | 41.4 |  |  | 26.5 |
Prior year tax positions(1) |  | — |  |  | 2.3 |  |  | 109.7 |
Reduction of prior year tax positions |  | (60.3) |  |  | — |  |  | (26.3) |
Lapse of statute of limitations |  | (28.1) |  |  | (76.2) |  |  | — |
Other |  | 0.6 |  |  | 0.6 |  |  | — |
Balance, end of period |  | $ | 218.6 |  |  | $ | 242.8 |  |  | $ | 274.7 |
(1) For the fiscal year ended March 31, 2023, the increase in prior year tax positions of $109.7 related to purchase accounting for the Zynga acquisition. 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.

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