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INCOME TAXES | 12 Months Ended
--- | ---
Mar. 31, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The domestic (Singapore) and foreign components of income from continuing operations before income taxes were comprised of the following:
| Fiscal Year Ended March 31,
| 2025 |  | 2024 |  | 2023
| (In millions)
Domestic | $ | 94 |  |  | $ | (165) |  |  | $ | 99 |
Foreign | 929 |  |  | 831 |  |  | 708 |
Total | $ | 1,023 |  |  | $ | 666 |  |  | $ | 807 |
The (benefit from) provision for income taxes from continuing operations consisted of the following:
| Fiscal Year Ended March 31,
| 2025 |  | 2024 |  | 2023
| (In millions)
Current: |  |  |  |  |
Domestic | $ | 2 |  |  | $ | 3 |  |  | $ | 6 |
Foreign | 128 |  |  | 161 |  |  | 117 |
| 130 |  |  | 164 |  |  | 123 |
Deferred: |  |  |  |  |
Domestic | 3 |  |  | (1) |  |  | 1 |
Foreign | 52 |  |  | (369) |  |  | — |
| 55 |  |  | (370) |  |  | 1 |
(Benefit from) provision for income taxes | $ | 185 |  |  | $ | (206) |  |  | $ | 124 |
The domestic statutory income tax rate was approximately 17.0% in fiscal years 2025, 2024 and 2023. The reconciliation of the income tax expense (benefit) from continuing operations expected based on domestic statutory income tax rates to the expense (benefit) for income taxes included in the consolidated statements of operations is as follows:
| Fiscal Year Ended March 31,
| 2025 |  | 2024 |  | 2023
| (In millions)
Income taxes based on domestic statutory rates | $ | 174 |  |  | $ | 113 |  |  | $ | 137 |
Effect of jurisdictional tax rate differential | 13 |  |  | 68 |  |  | 52 |
Change in unrecognized tax benefit | (19) |  |  | (10) |  |  | (7) |
Change in valuation allowance | (37) |  |  | (685) |  |  | (290) |
Foreign exchange movement on prior year taxes recoverable | 4 |  |  | (1) |  |  | 4 |
Liability for undistributed earnings | 6 |  |  | 135 |  |  | — |
Global intangible low-taxed income (GILTI) / Subpart F income | 9 |  |  | 13 |  |  | 18 |
Nextracker related transactions gains | — |  |  | 115 |  |  | 158 |
Earnings from partnership | — |  |  | 47 |  |  | 39 |
U.S. state taxes | 10 |  |  | 10 |  |  | 2 |
Excess compensation (Section 162(m)) | 16 |  |  | 15 |  |  | 9 |
Other | 9 |  |  | (26) |  |  | 2 |
(Benefit from) provision for income taxes | $ | 185 |  |  | $ | (206) |  |  | $ | 124 |
A number of countries in which the Company is located allow for tax holidays or provide other tax incentives to attract and retain business. In general, these holidays were secured based on the nature, size and location of the Company’s operations. The aggregate dollar effect on the Company’s income resulting from tax holidays and tax incentives to attract and retain business for the fiscal years ended March 31, 2025, 2024 and 2023 were $17 million, $20 million and $14 million, respectively. For the fiscal year ended March 31, 2025, the effect on basic and diluted earnings per share was $0.04, and the effects on basic and diluted earnings per share during fiscal years 2024 and 2023 were $0.05, and $0.03, respectively. Unless extended or otherwise renegotiated, the Company's existing holidays will expire in various years through the end of fiscal year 2032. The Company provides a valuation allowance against deferred tax assets that in the Company's estimation are not more likely than not to be realized. During fiscal years 2025, 2024 and 2023, the Company released net valuation allowances totaling $4 million, $447 million and $6 million, respectively. For fiscal year 2025, included in the $4 million net release was a $5 million valuation allowance release related to the Company’s Canadian operations as these amounts were deemed to be more likely than not to be realized. In addition, various other valuation allowance positions in other jurisdictions were increased or decreased to offset movement in deferred tax positions due to varying factors such as one-time income recognition in loss entities with existing valuation allowances, liquidation of entities with existing valuation allowances, recognition of uncertain tax positions impacting deferred tax assets with existing valuation allowances, foreign exchange impacts on deferred tax balances with existing valuation allowances, and current period losses in legal entities with existing valuation allowance positions. These offsetting changes in the valuation allowance included a decrease of $53 million in the fiscal year ended March 31, 2025, an increase of $43 million and a decrease of $254 million in the fiscal years ended March 31 2024 and, 2023, respectively. Under its territorial tax system, Singapore generally does not tax foreign sourced income until repatriated to Singapore. The Company has included the effects of Singapore's territorial tax system in the rate differential line above. The tax effects of foreign income not repatriated to Singapore for the fiscal years ended March 31, 2025, 2024 and 2023 were $96 million, zero and $31 million, respectively. The components of deferred income taxes are as follows:
| As of March 31,
| 2025 |  | 2024
| (In millions)
Deferred tax liabilities: |  |  |
Fixed assets | $ | (44) |  |  | $ | (59) |
Intangible assets | (52) |  |  | (56) |
Others | (128) |  |  | (149) |
Total deferred tax liabilities | (224) |  |  | (264) |
Deferred tax assets: |  |  |
Fixed assets | 76 |  |  | 82 |
Intangible assets | 3 |  |  | 4 |
Deferred compensation | 37 |  |  | 25 |
Inventory valuation | 32 |  |  | 26 |
Provision for doubtful accounts | 3 |  |  | 2 |
Net operating loss and other carryforwards | 1,022 |  |  | 1,168 |
Tax receivable agreement | 74 |  |  | 77 |
Others | 186 |  |  | 184 |
Total deferred tax assets | 1,433 |  |  | 1,568 |
Valuation allowances | (781) |  |  | (838) |
Total deferred tax assets, net of valuation allowances | 652 |  |  | 730 |
Net deferred tax asset | $ | 428 |  |  | $ | 466 |
The net deferred tax asset is classified as follows: |  |  |
Long-term asset | $ | 577 |  |  | $ | 644 |
Long-term liability | (149) |  |  | (178) |
Total | $ | 428 |  |  | $ | 466 |
Utilization of the Company's deferred tax assets is limited by the future earnings of the Company in the tax jurisdictions in which such deferred assets arose. As a result, management is uncertain as to when or whether these operations will generate sufficient profit to realize any benefit from the deferred tax assets. The valuation allowance provides a reserve against deferred tax assets that are not more likely than not to be realized by the Company. However, management has determined that it is more likely than not that the Company will realize certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The change in valuation allowance is net of certain increases and decreases to prior year losses and other carryforwards that have no current impact on the tax provision. The Company has recorded deferred tax assets of approximately $1.1 billion related to tax losses and other carryforwards against which the Company has recorded a valuation allowance for all but $286 million of the deferred tax assets. These tax losses and other carryforwards will expire at various dates as follows:
Expiration dates of deferred tax assets related to operating losses and other carryforwards |
Fiscal year | (In millions)
2026 - 2031 | $ | 134 |
2032 - 2037 | 204 |
2038 and thereafter | 17 |
Indefinite | 696 |
| $ | 1,051 |
The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ from management’s estimates. The Company does not provide for income taxes on approximately $767 million of undistributed earnings of its subsidiaries which are considered to be indefinitely reinvested outside of Singapore as management has plans for the use of such earnings to fund certain activities outside of Singapore. The estimated amount of the unrecognized deferred tax liability on these undistributed earnings is approximately $80 million. In the current year, the Company, as part of its regular process, assessed its cash position in overseas territories relative to the levels needed to manage operations and fund future investment in those territories. Following a sustained improvement in the working capital position in China and a trend of customers nearshoring their manufacturing operations, management noted that the current and forecasted cash position in China was in excess of levels required to fund the Company’s business in the country. As a result, a deferred tax liability of $117 million was recorded on the remaining distributable earnings from China of approximately $1.17 billion. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Fiscal Year Ended March 31,
| 2025 |  | 2024
| (In millions)
Balance, beginning of fiscal year | $ | 197 |  |  | $ | 268 |
Additions based on tax position related to the current year | 10 |  |  | 10 |
Additions for tax positions of prior years | 1 |  |  | 22 |
Reductions for tax positions of prior years | (5) |  |  | (82) |
Reductions related to lapse of applicable statute of limitations | (23) |  |  | (17) |
Impact from foreign exchange rates fluctuation | — |  |  | (4) |
Balance, end of fiscal year | $ | 180 |  |  | $ | 197 |
The Company’s unrecognized tax benefits are subject to change over the next twelve months primarily as a result of the expiration of certain statutes of limitations and as audits are settled. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an additional approximate $15 million within the next twelve months primarily due to potential settlements of various audits and the expiration of certain statutes of limitations. The Company and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2006. Of the $180 million of unrecognized tax benefits at March 31, 2025, $153 million will affect the annual effective tax rate ("ETR") if the benefits are eventually recognized. The amount that does not impact the ETR relates to positions that would be settled with a tax loss carryforward previously subject to a valuation allowance. The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company’s tax expense. During the fiscal years ended March 31, 2025, 2024 and 2023, the Company recognized interest and penalties of approximately ($3) million, ($2) million and ($1) million, respectively. The Company had approximately $10 million, $13 million and $15 million accrued for the payment of interest and penalties as of the fiscal years ended March 31, 2025, 2024, and 2023, respectively.

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