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v3.23.2

Income Taxes | 12 Months Ended
--- | ---
Mar. 31, 2023
Statement [Line Items] |
Income Taxes | 13. Income taxes The domestic and foreign components of income before income taxes were comprised of the following:
|  | Fiscal year ended March 31, |
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Domestic |  | $ | 117,115 |  |  | $ | 45,259 |  |  | $ | 161,323 |
Foreign |  |  | 51,968 |  |  |  | 19,849 |  |  |  | (3,294) |
Total |  | $ | 169,083 |  |  | $ | 65,108 |  |  | $ | 158,029 |
The provision for (benefit from) income taxes consisted of the following:
|  | Fiscal year ended March 31, |
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | 35,244 |  |  | $ | 13,558 |  |  | $ | 34,013 |
Foreign |  |  | 18,238 |  |  |  | 5,974 |  |  |  | 2 |
Total |  |  | 53,482 |  |  |  | 19,532 |  |  |  | 34,015 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  |  | (8,660) |  |  |  | (6,173) |  |  |  | 54 |
Foreign |  |  | 2,928 |  |  |  | 836 |  |  |  | (388) |
Total |  |  | (5,732) |  |  |  | (5,337) |  |  |  | (334) |
Provision for income taxes |  | $ | 47,750 |  |  | $ | 14,195 |  |  | $ | 33,681 |
The domestic statutory income tax rate was 21% in fiscal years 2023, 2022, and 2021. The reconciliation of the income tax expense (benefit) 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, |
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Income taxes based on domestic statutory rates |  | $ | 35,508 |  |  | $ | 13,673 |  |  | $ | 33,186 |
Effect of tax rate differential |  |  | 7,487 |  |  |  | 2,638 |  |  |  | 342 |
FDII Deduction |  |  | (3,235) |  |  |  | (1,583) |  |  |  | (2,951) |
Foreign disregarded entities |  |  | 11,020 |  |  |  | — |  |  |  | — |
Foreign tax deduction |  |  | (3,659) |  |  |  | — |  |  |  | — |
Amount allocated to Non-controlling interest |  |  | (1,671) |  |  |  | — |  |  |  | — |
Stock-based compensation |  |  | — |  |  |  | (424) |  |  |  | (4) |
State |  |  | 4,535 |  |  |  | 880 |  |  |  | 2,689 |
Guaranteed payment on Series A Preferred Units |  |  | (4,500) |  |  |  | (875) |  |  |  | — |
Other |  |  | 2,265 |  |  |  | (114) |  |  |  | 419 |
Provision for income taxes |  | $ | 47,750 |  |  | $ | 14,195 |  |  | $ | 33,681 |
The components of deferred income taxes are as follows ( in thousands ):
|  | As of March 31, |
|  | 2023 |  |  | 2022 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed assets |  | $ | (54) |  |  | $ | (67) |
Intangible assets |  |  | — |  |  |  | (437) |
Others |  |  | (2,688) |  |  |  | (663) |
Total deferred tax liabilities |  |  | (2,742) |  |  |  | (1,167) |
Deferred tax assets: |  |  |  |  |  |  |  |
Fixed assets |  |  | — |  |  |  | 47 |
Stock-based compensation |  |  | 2,222 |  |  |  | 342 |
Deferred revenue |  |  | — |  |  |  | 3,967 |
Warranty reserve |  |  | — |  |  |  | 2,461 |
Accrued professional fees |  |  | — |  |  |  | 2,378 |
Provision for doubtful accounts |  |  | — |  |  |  | 449 |
Net operating loss and other carryforwards |  |  | 5,467 |  |  |  | 5,553 |
Investment in Nextracker LLC |  |  | 249,377 |  |  |  | — |
Others |  |  | 1,598 |  |  |  | 1,367 |
Total deferred tax assets |  |  | 258,664 |  |  |  | 16,564 |
Valuation allowances |  |  | (1,528) |  |  |  | — |
Total deferred tax assets, net of valuation allowances |  |  | 257,136 |  |  |  | 16,564 |
Net deferred tax asset |  | $ | 254,394 |  |  | $ | 15,397 |
The net deferred tax asset is classified as follows: |  |  |  |  |  |  |  |
Long-term asset |  | $ | 254,767 |  |  | $ | 15,828 |
Long-term liability |  |  | (373) |  |  |  | (431) |
Total |  | $ | 254,394 |  |  | $ | 15,397 |
The Company has recorded deferred tax assets of approximately $4.3 million related to tax losses and other carryforwards. 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 |
(In thousands) |  |  |
2024 - 2029 |  | $ | — |
2030 - 2035 |  |  | 437 |
2036 - Post |  |  | — |
Indefinite |  |  | 3,844 |
Total |  | $ | 4,281 |
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of March 31, 2023, a valuation allowance account of $1.5 million has been recorded to recognize only the portion of the deferred tax asset that is most likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. As of March 31, 2023, the Company has provided for earnings in foreign subsidiaries that are not considered to be indefinitely reinvested and therefore subject to withholding taxes on $4.9 million of undistributed foreign earnings, recording a deferred tax liability of approximately $0.5 million thereon. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | Fiscal year ended March 31, |
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance, beginning of fiscal year |  | $ | 440 |  |  | $ | 465 |  |  | $ | 410 |
Impact from foreign exchange rates fluctuation |  |  | (6) |  |  |  | (25) |  |  |  | 55 |
Balance, end of fiscal year |  | $ | 434 |  |  | $ | 440 |  |  | $ | 465 |
Nextracker and its subsidiaries file federal, state, and local income tax returns in multiple jurisdictions around the world. With few exceptions, Nextracker is no longer subject to income tax examinations by tax authorities for years before 2018. The Company recognizes interest and penalties accrued related to unrecognized tax benefits within the Company’s tax expense. During each of the fiscal years ended March 31, 2023, 2022 and 2021, the Company accrued interest and penalties of approximately $0.1 million. The Company had approximately $0.5 million and $0.4 million accrued for the payment of interest and penalty as of March 31, 2023 and 2022, respectively. Tax Receivable Agreement On February 13, 2023, Nextracker Inc. entered into a tax receivable agreement (the “Tax Receivable Agreement”or “TRA”) with the LLC, Yuma, Yuma Sub, TPG Rise and the following affiliates of TPG Rise: TPG Rise Climate Flash Cl BDH, L.P., TPG Rise Climate BDH, L.P. and The Rise Fund II BDH, L.P. (collectively, the “TPG Affiliates”). The Tax Receivable Agreement provides for the payment by Nextracker Inc.to Yuma, Yuma Sub, TPG and the TPG Affiliates (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that Nextracker Inc. is deemed to realize under certain circumstances as a result of (i) its allocable share of existing tax basis in tangible and intangible assets resulting from exchanges or acquisitions of outstanding Series A Preferred Units or common units of the LLC (collectively, the “LLC Units”), including as part of the Transactions or under the Exchange Agreement, (ii) increases in tax basis resulting from exchanges or acquisitions of LLC Units and shares of Nextracker Inc.’s Class B common stock (including as part of the Transactions or under the Exchange Agreement), (iii) certain pre-existing tax attributes of certain blocker corporations affiliated with TPG Rise that each merged with a separate direct, wholly-owned subsidiary of Nextracker Inc., as part of the Transactions, and (iv) certain other tax benefits related to Nextracker Inc. entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. As of March 31, 2023, a liability of $230.3 million was recorded for the expected amount to be paid to Yuma, Yuma sub, TPG and the TPG affiliates, which is included in TRA liability and other liability on the consolidated balance sheets. Separately, a deferred tax asset of $249.4 million has been booked reflecting Nextracker’s outside basis difference in Nextracker LLC, which is included in deferred tax assets and other assets on the consolidated balance sheets. The difference between the liability and the deferred tax asset was recorded to additional paid-in-capital on the consolidated balance sheets.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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