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Income Taxes | 12 Months Ended
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Mar. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax provision consists of the following (amounts in millions):
| Year Ended March 31,
| 2020 |  | 2019 |  | 2018
Pretax (loss) income: |  |  |  |  |
U.S. | $ | (485.2 | ) |  | $ | (593.4 | ) |  | $ | (127.3 | )
Foreign | 635.6 |  |  | 797.9 |  |  | 864.6 |
| $ | 150.4 |  |  | $ | 204.5 |  |  | $ | 737.3 |
Current (benefit) expense: |  |  |  |  |
U.S. Federal | $ | 21.1 |  |  | $ | (98.0 | ) |  | $ | 369.4 |
State | 1.0 |  |  | (5.3 | ) |  | 0.5 |
Foreign | 48.0 |  |  | 14.1 |  |  | 60.8 |
Total current (benefit) expense | $ | 70.1 |  |  | $ | (89.2 | ) |  | $ | 430.7 |
Deferred expense (benefit): |  |  |  |  |  |  |  |
U.S. Federal | $ | (127.8 | ) |  | $ | 11.9 |  |  | $ | 82.5 |
State | (13.2 | ) |  | 0.6 |  |  | 0.1 |
Foreign | (349.3 | ) |  | (74.7 | ) |  | (31.4 | )
Total deferred (benefit) expense | (490.3 | ) |  | (62.2 | ) |  | 51.2 |
Total Income tax (benefit) provision | $ | (420.2 | ) |  | $ | (151.4 | ) |  | $ | 481.9 |
On December 22, 2017, the Act was enacted into law. The Act provides for numerous significant tax law changes and modifications including the reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0%, the requirement for companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and the creation of new taxes on certain foreign-sourced earnings. The Company intends to invest substantially all of its foreign subsidiary earnings, as well as its capital in its foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which the Company would incur significant, additional costs upon repatriation of such amounts. It is not practical to estimate the additional tax that would be incurred, if any, if the permanently reinvested earnings were repatriated. The provision for income taxes differs from the amount computed by applying the statutory federal tax rate to income before income taxes. The sources and tax effects of the differences in the total income tax provision are as follows (amounts in millions):
| Year Ended March 31,
| 2020 |  | 2019 |  | 2018
Computed expected income tax provision | $ | 31.5 |  |  | $ | 43.0 |  |  | $ | 232.6 |
State income taxes, net of federal benefit | (5.4 | ) |  | (8.7 | ) |  | (1.3 | )
Foreign income taxed at lower than the federal rate | (78.8 | ) |  | (94.0 | ) |  | (208.8 | )
Impact of the Act - one-time transition tax, net of foreign tax credits | — |  |  | 13.1 |  |  | 653.7 |
Impact of the Act - deferred tax effects, net of valuation allowance | — |  |  | — |  |  | (136.7 | )
GILTI and foreign-derived intangible income ("FDII"), net of credits | 54.7 |  |  | 95.4 |  |  | — |
Business realignment of intellectual property rights | (334.8 | ) |  | (90.6 | ) |  | — |
Increases related to current year tax positions | 20.1 |  |  | 9.0 |  |  | 32.0 |
Decreases related to prior year tax positions (1) | (28.5 | ) |  | (75.1 | ) |  | (11.3 | )
Share-based compensation | (11.1 | ) |  | (13.3 | ) |  | (27.2 | )
Research and development tax credits | (40.8 | ) |  | (27.5 | ) |  | (17.0 | )
Intercompany prepaid tax asset amortization | — |  |  | 5.2 |  |  | 7.4 |
Foreign exchange | (0.9 | ) |  | 4.6 |  |  | (20.5 | )
Other | 2.4 |  |  | (2.6 | ) |  | (0.5 | )
Change in valuation allowance | (28.6 | ) |  | (9.9 | ) |  | (20.5 | )
Total income tax provision (benefit) | $ | (420.2 | ) |  | $ | (151.4 | ) |  | $ | 481.9 |
(1) The release of prior year tax positions during fiscal 2020 increased the basic and diluted net income per common share by $0.12 and $0.11, respectively. The release of prior year tax positions during fiscal 2019 increased the basic and diluted net income per common share by $0.32 and $0.30, respectively. The release of prior year tax positions during fiscal 2018 increased the basic and diluted net income per common share by $0.05. The foreign tax rate differential benefit primarily relates to the Company's operations in Thailand, Malta and Ireland. The Company's Thailand manufacturing operations are currently subject to numerous tax holidays granted to the Company based on its investment in property, plant and equipment in Thailand. The Company's tax holiday periods in Thailand expire between fiscal 2022 and 2026, however, the Company actively seeks to obtain new tax holidays. The Company does not expect the future expiration of any of its tax holiday periods in Thailand to have a material impact on its effective tax rate. Microsemi was previously granted a tax holiday in Malaysia, which expired in December 2019. The aggregate dollar benefit derived from these tax holidays approximated $11.4 million and $6.2 million in fiscal 2020 and fiscal 2018, respectively, compared to aggregate dollar expense derived from these tax holidays of approximately $0.1 million in fiscal 2019. The impact of the tax holidays during fiscal 2020 increased the basic and diluted net income per common share by $0.05 and $0.04, respectively. The impact of the tax holidays during fiscal 2018 increased the basic and diluted net income per common share by $0.03 and $0.02, respectively. There was no such impact of the tax holidays on the basic and diluted net income per common share during fiscal 2019. The Company's effective tax rate for fiscal 2020 includes a $334.8 million tax benefit related to intra-group transfers of certain intellectual property rights, which reduced its effective tax rate by 222.9%. The tax benefit for the intra-group asset transfers was primarily made up of $78.0 million recorded as a deferred tax asset which represents the book and tax basis difference on the transferred assets measured based on the new applicable statutory tax rate, as well as, the reversal of the pre-existing deferred tax liability of $259.9 million, which represents the book and tax basis difference on the transferred assets measured based on applicable statutory tax rate prior to the transfer. The Company expects to be able to realize the future tax benefit of the deferred tax assets resulting from the intra-group asset transfers. It is not uncommon for taxing authorities of different countries to have conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied with respect to the valuation of intellectual property rights. The taxing authorities of jurisdictions in which the Company operates may challenge its methodologies for valuing the intellectual property rights transferred, which could increase the Company's future effective income tax rate and harm future results of operations. The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax assets and deferred tax liabilities are as follows (amounts in millions):
| March 31,
| 2020 |  | 2019
Deferred tax assets: |  |  |
Inventory valuation | $ | 48.5 |  |  | $ | 45.0 |
Net operating loss carryforward | 74.8 |  |  | 94.3 |
Capital loss carryforward | 9.4 |  |  | 9.6 |
Share-based compensation | 39.8 |  |  | 42.4 |
Income tax credits | 351.1 |  |  | 376.5 |
Property, plant and equipment | 31.7 |  |  | 23.6 |
Accrued expenses and other | 80.4 |  |  | 91.4 |
Intangible assets | 1,694.8 |  |  | 1,608.1 |
Lease liabilities | 20.2 |  |  | — |
Other | 14.0 |  |  | 12.6 |
Gross deferred tax assets | 2,364.7 |  |  | 2,303.5 |
Valuation allowances | (303.5 | ) |  | (332.1 | )
Deferred tax assets, net of valuation allowances | 2,061.2 |  |  | 1,971.4 |
Deferred tax liabilities: |  |  |  |  |
Convertible debt | (228.7 | ) |  | (279.3 | )
Intangible assets | (365.1 | ) |  | (721.0 | )
ROU assets | (24.3 | ) |  | — |
Other | (13.1 | ) |  | — |
Deferred tax liabilities | (631.2 | ) |  | (1,000.3 | )
Net deferred tax asset | $ | 1,430.0 |  |  | $ | 971.1 |
Reported as: |  |  |
Non-current deferred tax assets | $ | 1,748.5 |  |  | $ | 1,677.2 |
Non-current deferred tax liability | (318.5 | ) |  | (706.1 | )
Net deferred tax asset | $ | 1,430.0 |  |  | $ | 971.1 |
In assessing whether it is more likely than not that deferred tax assets will be realized, the Company considers all available evidence, both positive and negative, including its recent cumulative earnings experience and expectations of future available taxable income of the appropriate character by taxing jurisdiction, tax attribute carryback and carryforward periods available for tax reporting purposes, and prudent and feasible tax planning strategies. A summary of additions and deductions related to the valuation allowance for deferred tax asset accounts for the years ended March 31, 2020, 2019 and 2018 follows (amounts in millions):
| Balance at Beginning of Year |  | Additions Charged to Costs and Expenses |  | Additions Charged to Other Accounts |  | Deductions |  | Balance at End of Year
Valuation allowance for deferred tax assets: |  |  |  |  |  |  |  |  |
Fiscal 2020 | $ | 332.1 |  |  | $ | 26.0 |  |  | $ | — |  |  | $ | (54.6 | ) |  | $ | 303.5 |
Fiscal 2019 | $ | 204.5 |  |  | $ | 16.2 |  |  | $ | 175.8 |  |  | $ | (64.4 | ) |  | $ | 332.1 |
Fiscal 2018 | $ | 210.1 |  |  | $ | 36.2 |  |  | $ | — |  |  | $ | (41.8 | ) |  | $ | 204.5 |
The Company had federal, state and foreign NOL carryforwards with an estimated tax effect of $74.8 million available at March 31, 2020. The federal, state and foreign NOL carryforwards expire at various times between fiscal 2021 and fiscal 2040, of which a portion of the NOL carryforwards do not expire. The Company had state tax credits of $168.2 million available at March 31, 2020. These state tax credits expire at various times between fiscal 2021 and fiscal 2040. The Company had capital loss carryforwards with an estimated tax effect of $9.4 million available at March 31, 2020. These capital loss carryforwards begin to expire in fiscal 2021. The Company had foreign tax credits of $4.1 million available at March 31, 2020. These foreign tax credits begin to expire in fiscal 2022. The Company had credits for increasing research activity in the amount of $104.1 million available at March 31, 2020. These credits begin to expire in fiscal 2021. The Company had U.S. prior year minimum tax credits in the amount of $9.2 million available at March 31, 2020. The Company had refundable tax credits in foreign jurisdictions of $45.1 million available at March 31, 2020. The Company had withholding tax credits in foreign jurisdictions of $20.4 million available at March 31, 2020. These credits expire at various times between fiscal 2022 and fiscal 2024. The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The Company files U.S. federal, U.S. state, and foreign income tax returns. For U.S. federal, and in general for U.S. state tax returns, the fiscal 2007 and later tax years remain effectively open for examination by tax authorities. For foreign tax returns, the Company is generally no longer subject to income tax examinations for years prior to fiscal 2007. Significant judgment is required in evaluating the Company's uncertain tax positions and determining its provision for income taxes. Although the Company believes that it has appropriately reserved for its uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different than expectations. The Company will adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit, the refinement of an estimate, the closing of a statutory audit period or changes in applicable tax law. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences would impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to the reserves that are considered appropriate, as well as related net interest. The Company recognizes liabilities for anticipated tax audit issues in the U.S. and other domestic and international tax jurisdictions based on its estimate of whether, and the extent to which, the tax positions are more likely than not to be sustained based on the technical merits. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax laws applied to the facts of each matter. The Company believes it maintains appropriate reserves to offset any potential income tax liabilities that may arise upon final resolution of matters for open tax years. If such reserve amounts ultimately prove to be unnecessary, the resulting reversal of such reserves could result in tax benefits being recorded in the period the reserves are no longer deemed necessary. If such amounts prove to be less than an ultimate assessment, a future charge to expense would be recorded in the period in which the assessment is determined. The following table summarizes the activity related to the Company's gross unrecognized tax benefits from April 1, 2017 to March 31, 2020 (amounts in millions):
| Year Ended March 31,
| 2020 |  | 2019 |  | 2018
Beginning balance | $ | 763.4 |  |  | $ | 436.0 |  |  | $ | 398.5 |
Increases related to acquisitions | — |  |  | 329.7 |  |  | — |
Decreases related to settlements with tax authorities | (1.2 | ) |  | (8.3 | ) |  | (0.1 | )
Decreases related to statute of limitation expirations | (30.9 | ) |  | (16.2 | ) |  | (10.9 | )
Increases related to current year tax positions | 30.2 |  |  | 27.8 |  |  | 30.3 |
Increases (decreases) related to prior year tax positions | (4.2 | ) |  | (5.6 | ) |  | 18.2 |
Ending balance | $ | 757.3 |  |  | $ | 763.4 |  |  | $ | 436.0 |
As of March 31, 2020 and March 31, 2019, the Company had accrued interest and penalties related to tax contingencies of $74.6 million and $88.1 million, respectively. Previously accrued interest and penalties that were released during the years ended March 31, 2020 and March 31, 2019 were $13.5 million and $37.5 million, respectively. Interest and penalties charged to operations during the year ended March 31, 2018 were $5.4 million. The Company is currently under income tax examination in various tax jurisdictions in which it operates. The years under examination range from fiscal 2007 through fiscal 2019. In some jurisdictions, the Company has received tax assessments in excess of established reserves. The Company is contesting these tax assessments, and will continue to do so, including pursuing all available remedies such as appeals and litigation, if necessary. During fiscal 2020, additional assessments were received for these issues and the Company’s position remains unchanged. The total amount of gross unrecognized tax benefits was $757.3 million and $763.4 million as of March 31, 2020 and March 31, 2019, respectively, of which $654.0 million and $664.4 million is estimated to impact the Company's effective tax rate, if recognized. The Company estimates that it is reasonably possible unrecognized tax benefits as of March 31, 2020 could decrease by approximately $10.0 million in the next 12 months. Positions that may be resolved include various U.S. and non-U.S. matters. In April 2020, the Company became aware of a withholding tax regulation that could be interpreted to apply to certain of its previous intra-group transactions. The Company is evaluating whether the interpretation of this regulation could apply to its facts and circumstances, and, upon conclusion of its analysis, the Company may establish a reserve related to this matter in a subsequent period. An estimate of the impact on the financial statements cannot be made at this time. On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. In the July 2015 ruling, the Tax Court concluded that the sharing of the cost of employee stock compensation in a company’s cost-sharing arrangement was invalid under the U.S. Administrative Procedures Act. In June 2019, a panel of the Ninth Circuit of the U.S. Court of Appeals reversed this decision. In July 2019, Altera petitioned U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing of the case. In November 2019, the en banc rehearing petition was denied, and Altera has asked the Supreme Court for a judicial review. Due to the uncertainty surrounding the status of the current regulations and questions related to the scope of potential benefits, the Company has not recorded any adjustments as of March 31, 2020. The Company will continue to monitor ongoing developments and potential impacts to its financial statements.

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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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