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Provision for Taxes
 12 Months Ended
Mar. 31, 2025
Disclosure Text Block [Abstract]  
Provision for Taxes

Note 15. Provision for Taxes

Earnings before taxes and the provision for taxes consisted of the following:

 

 

 

Years Ended March 31,

 

 

 

2025

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Pretax earnings:

 

 

 

 

U.S.

$

 

468,152

 

$

 

816,238

 

$

 

1,179,738

 

Non-U.S.

 

9,360

 

 

 

23,939

 

 

 

39,659

 

Total pretax earnings

$

 

477,512

 

$

 

840,177

 

$

 

1,219,397

 

 

 

 

 

 

 

 

 

 

 

Current provision

 

 

 

 

 

 

 

 

 

Federal

$

 

56,474

 

$

 

66,356

 

$

 

115,171

 

State

 

 

8,413

 

 

 

44,707

 

 

 

42,121

 

Non-U.S.

 

 

141

 

 

 

254

 

 

 

5,150

 

 

 

 

65,028

 

 

 

111,317

 

 

 

162,442

 

Deferred provision

 

 

 

 

 

 

 

 

 

Federal

 

 

36,070

 

 

 

88,549

 

 

 

114,355

 

State

 

 

6,357

 

 

 

6,542

 

 

 

14,077

 

Non-U.S.

 

 

2,967

 

 

 

5,062

 

 

 

4,051

 

 

 

 

45,394

 

 

 

100,153

 

 

 

132,483

 

 

 

 

 

 

 

 

 

 

 

Provision for income tax expense

$

 

110,422

 

$

 

211,470

 

$

 

294,925

 

 

 

 

 

 

 

 

 

 

 

Income taxes paid

$

 

95,391

 

$

 

68,623

 

$

 

145,680

 

 

The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before taxes was as follows:

 

 

 

Years Ended March 31,

 

 

 

 

2025

 

 

2024

 

 

2023

 

 

 

 

(In percentages)

 

 

Statutory federal income tax rate

 

21.00

 

%

 

21.00

 

%

 

21.00

 

%

Increase (reduction) in rate resulting from:

 

 

 

 

 

 

 

 

 

 

State taxes, net of federal benefit

 

 

2.47

 

%

 

4.78

 

%

 

3.56

 

%

Foreign rate differential

 

 

0.24

 

%

 

0.03

 

%

 

0.08

 

%

Federal tax credits

 

 

(0.80

)

%

 

(0.58

)

%

 

(0.48

)

%

Tax-exempt income

 

 

(0.06

)

%

 

(0.04

)

%

 

(0.08

)

%

Dividend received deduction

 

 

(0.01

)

%

 

(0.01

)

%

 

(0.01

)

%

Other

 

 

0.28

 

%

 

(0.01

)

%

 

0.15

 

%

Effective income tax rate

 

 

23.12

 

%

 

25.17

 

%

 

24.22

 

%

 

Significant components of our deferred tax assets and liabilities were as follows:

 

 

 

March 31,

 

 

 

2025

 

 

2024

 

Deferred tax assets:

 

(In thousands)

 

Benefit of tax net operating loss, interest and credit carryforwards

$

 

45,140

 

$

 

36,978

 

Accrued expenses

 

 

120,725

 

 

 

108,512

 

Policy benefit and losses, claims and loss expenses payable, net

 

 

36,072

 

 

 

33,736

 

Unrealized losses on investments

 

 

35,272

 

 

 

32,856

 

Capitalized expenditures

 

 

12,241

 

 

 

8,969

 

Operating leases

 

 

9,849

 

 

 

11,521

 

Other

 

 

540

 

 

 

—

 

Total deferred tax assets

$

 

259,839

 

$

 

232,572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

Property, plant and equipment

$

 

1,728,789

 

$

 

1,655,074

 

Operating leases

 

 

9,628

 

 

 

11,214

 

Deferred policy acquisition costs

 

 

11,342

 

 

 

10,709

 

Other

 

 

—

 

 

 

2,700

 

Total deferred tax liabilities

 

 

1,749,759

 

 

 

1,679,697

 

Net deferred tax liability

$

 

1,489,920

 

$

 

1,447,125

 

 

The NOL, interest and credit carry-forwards in the above table are primarily attributable to state NOLs. As of March 31, 2025 and 2024, we had state NOLs of $816.8 million and $628.9 million, respectively, that will expire between fiscal 2026 and 2045 for most jurisdictions, if not utilized.

On March 3, 2021, the IRS notified us that our federal income tax returns for the tax years March 31, 2014, 2015, 2016, 2018 and 2019 were selected for examination. The examination eventually expanded to include all years March 31, 2012 through March 31, 2021. The examination was completed and report finalized in March 2024. As a result, we are owed $129 million which is reflected in prepaid expense, plus interest of $19.0 million, which is reflected in trade receivables and reinsurance recoverables, net. The refund is currently under review by the Joint Committee on Taxation.

No additional income taxes have been provided for any remaining undistributed foreign earnings or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.

We account for uncertainty in income taxes by recognizing the tax benefit or expense from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits and expenses recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

A reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period are as follows:

 

 

 

Unrecognized Tax Benefits

 

 

 

March 31,

 

 

 

2025

 

 

2024

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

Unrecognized tax benefits beginning balance

$

 

81,976

 

$

 

58,107

 

Additions based on tax positions related to the current year

 

 

7,215

 

 

 

10,202

 

Reductions for tax positions of prior years

 

 

(5,594

)

 

 

(27,536

)

Additions for tax provisions of prior years

 

 

—

 

 

 

41,203

 

Unrecognized tax benefits ending balance

$

 

83,597

 

$

 

81,976

 

 

Included in the balance of unrecognized tax benefits as of March 31, 2025 and March 31, 2024 are $66.0 million and $64.8 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

We recognize interest related to unrecognized tax benefits as interest expense and penalties as income tax expenses. As of March 31, 2025 and 2024, the amount of interest accrued on unrecognized tax benefits was $13.3 million and $9.6 million, respectively, net of tax. During the current year, we recorded a benefit from interest in the amount of $3.7 million, net of tax. At March 31, 2025 and 2024, the amount of penalties accrued on unrecognized tax benefits was $21.8 million and $20.2 million. During the current year, we recorded expense from penalties in the amount of $1.6 million. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within 12 months of the reporting date.

We file income tax returns in the U.S. federal jurisdiction, and various states and Canadian jurisdictions. While the Company has ongoing audits in various state jurisdictions, there have been no proposed or anticipated adjustments that would materially impact the consolidated financial statements. Our tax years remain open for examination by federal authorities for three years, state authorities for three to four years and Canadian authorities for four years.

The Canadian government has issued draft Pillar Two legislation (Global Minimum Tax Act), on June 20, 2024, that includes the Income Inclusion Rule and Qualified Domestic Minimum Top-Up Tax. The Canadian legislation went into effect for our fiscal year beginning April 1, 2024. We have performed an assessment of the potential exposure to Pillar Two income taxes. Based on the assessment performed, the Pillar Two effective tax rates in all jurisdictions in which we operate are above the 15% minimum tax rate. We will continue to evaluate the legislation but do not expect the rules to have an impact on the income tax provision or cash taxes.