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Income Taxes | 12 Months Ended
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Mar. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Impact of U.S. CARES Act 2020 In response to the COVID-19 Pandemic, many governments implemented measures to provide aid and economic stimulus in the form of tax incentives. On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act includes several significant business tax provisions as well as relief for individual taxpayers. The CARES Act modified the tax rules related to net operating loss ("NOL") uses. In the fourth quarter of fiscal 2020, we recorded a current tax benefit of approximately $10.0 million which represented our estimate of the net operating loss carryback resulting from the CARES Act. In the first quarter of fiscal 2021, we recorded an adjustment of $3.2 million to reduce the current benefit of the net operating loss carryback benefit we realized from the CARES Act. Impact of U.S. Tax Reform 2017 The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings. The most significant impact of the legislation for the Company was the reduction of the value of the Company's net deferred tax assets (which represent future tax benefits) as a result of lowering the U.S. corporate income tax rate from 35% to 21%. The Act also included a requirement to pay a one-time transition tax on the cumulative value of earnings and profits that were previously not repatriated for U.S. income tax purposes. We have concluded that the one-time transition tax is zero. In addition, we no longer consider the undistributed earnings held outside of the U.S. by most of its foreign subsidiaries to be indefinitely reinvested. The Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income ("GILTI") earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. Because the Company was evaluating the provisions of GILTI as of the fiscal year ended March 31, 2018, it recorded no GILTI-related deferred amounts in the financial statements for the year ended March 31, 2018. After further consideration, the Company has elected to account for GILTI in the year the tax is incurred, and has recorded an estimate of GILTI as a component of the projected tax provision for the fiscal years ending March 31, 2021, 2020 and 2019. Valuation Allowance Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance, we considered all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. As a result of this analysis, we determined that it is more likely than not that we will not realize the benefits of our gross deferred tax assets and therefore have recorded a valuation allowance to reduce the carrying value of these gross deferred tax assets, net of the impact of the reversal of taxable temporary differences. The components of income (loss) before income taxes were as follows:
|  | Year Ended March 31,
|  | 2021 |  | 2020 |  | 2019
Domestic |  | $ | (28,628) |  |  | $ | (16,670) |  |  | $ | (1,762) |
Foreign |  | 7,393 |  |  | 4,124 |  |  | 12,189 |
|  | $ | (21,235) |  |  | $ | (12,546) |  |  | $ | 10,427 |
The components of income tax expense (benefit) were as follows:
|  | Year Ended March 31,
|  | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |  |
Federal |  | $ | 3,399 |  |  | $ | (10,071) |  |  | $ | (1,772) |
State |  | 196 |  |  | (613) |  |  | 103 |
Foreign |  | 6,215 |  |  | 5,566 |  |  | 8,371 |
Deferred: |  |  |  |  |  |
Federal |  | (113) |  |  | 284 |  |  | 144 |
State |  | — |  |  | — |  |  | — |
Foreign |  | 22 |  |  | (2,067) |  |  | 20 |
|  | $ | 9,719 |  |  | $ | (6,901) |  |  | $ | 6,866 |
A reconciliation of the statutory tax rates and the effective tax rates for the years ended March 31, 2021, 2020 and 2019 are as follows:
|  | Year Ended March 31,
|  | 2021 |  | 2020 |  | 2019
Statutory federal income tax expense (benefit) rate |  | (21.0) | % |  | (21.0) | % |  | 21.0 | %
State and local income tax expense, net of federal income tax effect |  | 0.9 | % |  | (4.9) | % |  | 1.0 | %
Foreign earnings taxed at different rates |  | 10.0 | % |  | 12.3 | % |  | 25.5 | %
U.S. tax on Global Intangible Low-Taxed Income |  | 1.8 | % |  | 14.5 | % |  | 72.9 | %
Domestic permanent differences including acquisition items |  | 1.7 | % |  | 7.7 | % |  | 7.8 | %
Foreign tax credits |  | (7.8) | % |  | (19.3) | % |  | (22.4) | %
Research credits |  | (68.6) | % |  | (32.9) | % |  | (51.8) | %
Tax reserves |  | (0.1) | % |  | (0.6) | % |  | (5.2) | %
Valuation allowance |  | 74.4 | % |  | 64.0 | % |  | (76.7) | %
Enacted tax law changes |  | — | % |  | 10.6 | % |  | (7.8) | %
Stock-based compensation |  | 36.3 | % |  | (43.1) | % |  | 97.2 | %
CARES Act Impact |  | 15.0 | % |  | (82.1) | % |  | — | %
Reduction of NOL for carryback |  | — | % |  | 59.2 | % |  | — | %
Other differences, net |  | 3.2 | % |  | (19.4) | % |  | 4.3 | %
Effective income tax expense (benefit) |  | 45.8 | % |  | (55.0) | % |  | 65.8 | %
The significant components of our deferred tax assets are as follows:
|  | March 31,
|  | 2021 |  | 2020
Deferred tax assets: |  |  |  |
Net operating losses |  | $ | 12,586 |  |  | $ | 16,075 |
Equity investment |  | 1,193 |  |  | 1,192 |
Stock-based compensation |  | 16,280 |  |  | 20,792 |
Deferred revenue |  | 14,879 |  |  | 16,027 |
Tax credits |  | 39,062 |  |  | 24,936 |
Accrued expenses |  | 3,568 |  |  | 4,675 |
Allowance for doubtful accounts and other reserves |  | 801 |  |  | 546 |
Less: valuation allowance |  | (78,339) |  |  | (61,702) |
Total deferred tax assets |  | 10,030 |  |  | 22,541 |
Deferred tax liabilities: |  |  |  |
Depreciation and amortization |  | (4,553) |  |  | (16,349) |
Deferred commissions and other |  | (6,238) |  |  | (7,041) |
Total deferred tax liabilities |  | $ | (10,791) |  |  | $ | (23,390) |
Net deferred tax liability |  | $ | (761) |  |  | $ | (849) |
During fiscal 2019, the Company could no longer assert that it had the intent to indefinitely reinvest the earnings and profits of the foreign subsidiaries, with the exception of India. Accordingly, the Company was required to adjust its deferred tax liability for the effects of this change in assertion. This effect was not significant. Our position during fiscal 2021 remains unchanged. At March 31, 2021, we had NOL carry forwards of $47,976. There are $22,061 NOLs that will expire between 2034 and 2036 and $25,915 NOLs that will not expire. As of March 31, 2021, we had deferred tax assets related to state NOL carry forwards of $1,779 which expire over various years beginning in 2030 depending on the jurisdiction. We also had federal and state research tax credits ("R&D credit") carryforwards of approximately $27,828 and $13,743, respectively. The federal R&D credit carryforwards expire from 2034 through 2041, and the state R&D credit carryforwards expire from 2022 through 2036. We conduct business globally and as a result, file income tax returns in the United States and in various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. The following table summarizes the tax years subject to income tax examinations by tax authorities as of March 31, 2021. The years subject to income tax examination in our foreign jurisdictions cover the maximum time period with respect to these jurisdictions. Due to NOLs, in some cases the tax years continue to remain subject to examination with respect to such NOLs.
Tax Jurisdiction | Years Subject to Income Tax Examination
U.S. Federal | 2017 - Present
Foreign jurisdictions | 2013 - Present
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in each of our tax jurisdictions. The number of years with open tax audits varies depending on the tax jurisdiction. A number of years may lapse before a particular matter is audited and finally resolved. A reconciliation of the amounts of unrecognized tax benefits is as follows:
Balance at March 31, 2018 | $ | 1,740 |
Additions for tax positions related to fiscal 2019 | — |
Additions for tax positions related to prior years | 547 |
Settlements and effective settlements with tax authorities and remeasurements | — |
Reductions related to the expiration of statutes of limitations | (695) |
Foreign currency translation adjustment | — |
Balance at March 31, 2019 | 1,592 |
Additions for tax positions related to fiscal 2020 | 170 |
Additions for tax positions related to prior years | — |
Settlements and effective settlements with tax authorities and remeasurements | — |
Reductions related to the expiration of statutes of limitations | (100) |
Foreign currency translation adjustment | — |
Balance at March 31, 2020 | 1,662 |
Additions for tax positions related to fiscal 2021 | 614 |
Additions for tax positions related to prior years | — |
Settlements and effective settlements with tax authorities and remeasurements | — |
Reductions related to the expiration of statutes of limitations | (65) |
Foreign currency translation adjustment | — |
Balance at March 31, 2021 | 2,211 |
We estimate that no significant remaining unrecognized tax benefits will be realized during the fiscal year ending March 31, 2022. Interest and penalties related to unrecognized tax benefits are recorded in Income tax expense. In the years ended March 31, 2021, 2020 and 2019, we recognized $9, $6 and $40, respectively, of net interest and penalties in the Consolidated Statements of Operations.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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