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INCOME TAXES | 12 Months Ended
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Mar. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income tax expense consisted of the following (in thousands):
| Fiscal Year Ended March 31,
| 2022 |  | 2021 |  | 2020
Domestic | $ | 27,690 |  |  | $ | 4,985 |  |  | $ | (1,502) |
Foreign | 15,202 |  |  | 17,319 |  |  | 3,426 |
| $ | 42,892 |  |  | $ | 22,304 |  |  | $ | 1,924 |
The components of the income tax expense (benefit) are as follows (in thousands):
| Fiscal Year Ended March 31,
| 2022 |  | 2021 |  | 2020
Current income tax expense: |  |  |  |  |
Federal | $ | 7,240 |  |  | $ | 14,701 |  |  | $ | 2,817 |
State | 2,897 |  |  | 2,426 |  |  | 1,850 |
Foreign | 9,343 |  |  | 9,902 |  |  | 9,712 |
| 19,480 |  |  | 27,029 |  |  | 14,379 |
Deferred income tax benefit: |  |  |  |  |
Federal | (7,240) |  |  | (18,190) |  |  | (5,287) |
State | (3,406) |  |  | (3,404) |  |  | (2,897) |
Foreign | (1,816) |  |  | (2,483) |  |  | (1,517) |
| (12,462) |  |  | (24,077) |  |  | (9,701) |
| $ | 7,018 |  |  | $ | 2,952 |  |  | $ | 4,678 |
The income tax expense (benefit) computed using the U.S. statutory federal income tax rate differs from NetScout's effective tax rate primarily due to the following:
| Fiscal Year Ended March 31,
| 2022 |  | 2021 |  | 2020
U.S. statutory federal income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal tax effect | 1.1 |  |  | 2.4 |  |  | (52.9) |
U.S. federal and state research and development tax credits | (11.9) |  |  | (23.7) |  |  | (226.4) |
Effect of foreign operations | 6.3 |  |  | (4.5) |  |  | 46.8 |
Meals and entertainment | 0.2 |  |  | 0.8 |  |  | 44.6 |
Change in valuation allowance | 5.1 |  |  | 24.0 |  |  | 250.0 |
Internal restructuring charges | — |  |  | — |  |  | 196.5 |
Stock compensation | 2.0 |  |  | 5.1 |  |  | 172.7 |
Global intangible low taxed income | (0.1) |  |  | 0.8 |  |  | 8.4 |
Foreign derived intangible income | (12.6) |  |  | (24.5) |  |  | (144.3) |
Base erosion and anti-abuse act | — |  |  | — |  |  | (322.8) |
Foreign withholding | 5.2 |  |  | 13.8 |  |  | 222.5 |
Other permanent differences | 0.1 |  |  | (2.0) |  |  | 27.0 |
| 16.4 | % |  | 13.2 | % |  | 243.1 | %
Certain amounts in the table above for the fiscal years ended March 31, 2021 and 2020 have been reclassified to conform to the current period presentation. The components of net deferred tax assets and liabilities are as follows (in thousands):
| Fiscal Year Ended March 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Accrued expenses | $ | 8,721 |  |  | $ | 8,480 |
Deferred revenue | 17,267 |  |  | 17,648 |
Reserves | 3,106 |  |  | 2,898 |
Pension and other retiree benefits | 4,903 |  |  | 6,160 |
Net operating loss carryforwards | 11,611 |  |  | 11,526 |
Tax credit carryforwards | 21,132 |  |  | 19,432 |
Share-based compensation | 6,172 |  |  | 5,397 |
Operating lease liability | 15,639 |  |  | 17,333 |
Other deferred tax assets | 658 |  |  | 2,116 |
Total gross deferred tax assets | 89,209 |  |  | 90,990 |
Valuation allowance | (13,160) |  |  | (11,406) |
Net deferred tax assets | 76,049 |  |  | 79,584 |
Deferred tax liabilities: |  |  |
Intangible assets | (117,839) |  |  | (132,635) |
Operating lease right-of-use asset | (13,189) |  |  | (14,474) |
Depreciation | (6,612) |  |  | (7,818) |
Other deferred tax liabilities | (10,425) |  |  | (8,848) |
Total deferred tax liabilities | $ | (72,016) |  |  | $ | (84,191) |
Deferred tax assets and liabilities are recognized based on the anticipated future tax consequences, attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets by considering all positive and negative evidence. The Company weighs objective and verifiable evidence more heavily in this analysis. In situations where the Company concludes that it does not have sufficient objective and verifiable evidence to support the realizability of the asset it creates a valuation allowance against it. As a result, the Company established a valuation allowance of $11.4 million as of March 31, 2021 and $13.2 million as of March 31, 2022, representing an increase of $1.8 million. The increase in the valuation allowance as of March 31, 2022, as compared to March 31, 2021, is primarily due to deferred tax assets related to U.S. foreign tax credits that the Company believes are not more likely than not to be realized. If it is later determined the Company is able to use all or a portion of the deferred tax assets for which a valuation allowance has been established, then the Company may be required to recognize these deferred tax assets as a tax benefit recorded in the period such determination is made. At March 31, 2022, the Company had U.S. federal net operating loss carry forwards of $7 million and state net operating loss carryforwards of $54 million that are subject to expire at various dates beginning in 2025 and 2028, respectively. At March 31, 2022, the Company also had U.S. foreign tax credit carryforwards and state tax credits of $5 million and $9 million that are subject to expire at various dates beginning 2029 and 2030, respectively. At March 31, 2022, the Company had foreign net operating loss carryforwards of $42 million and foreign tax credit carryforwards of $7 million, respectively. The majority of foreign net operating losses and foreign tax credits have no expiration dates. As of March 31, 2022, the Company does not expect any U.S. federal and state net operating losses or research and development tax credits to go unutilized. The Company files U.S. federal tax returns and files returns in various state, local and foreign jurisdictions. With respect to the U.S. federal and primary jurisdictions, the Company is no longer subject to examinations by tax authorities for tax years before 2017, although carryforward attributes that were generated prior to 2017 may still be adjusted upon examination if they either have been or will be used in a future period. The Company also receives inquiries from various tax jurisdictions during the year, and some of those inquiries may include an audit of tax returns previously filed. In the normal course of business, NetScout and its subsidiaries are examined by various taxing authorities, including the IRS in the United States. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, for the fiscal years ended March 31, 2022, 2021 and 2020 is as follows (in thousands):
| Fiscal Year Ended March 31,
| 2022 |  | 2021 |  | 2020
Balance at April 1, | $ | 913 |  |  | $ | 1,151 |  |  | $ | 1,314 |
Additions based on tax positions related to the current year | 28 |  |  | 48 |  |  | 49 |
Reductions of prior years tax positions due to lapse of statute of limitations | (303) |  |  | (286) |  |  | (212) |
Balance at March 31, | $ | 638 |  |  | $ | 913 |  |  | $ | 1,151 |
The Company is unable to make a reliable estimate when cash settlement, if any, will occur with a tax authority as the timing of examinations and ultimate resolution of those examinations is uncertain. All of the unrecognized tax benefits would affect the effective tax rate if recognized. The Company includes interest and penalties accrued in the consolidated financial statements as a component of the tax provision. The interest and penalties are immaterial to the provision. Over the next twelve months, previously unrecognized tax benefits primarily due to the lapse of statute of limitations will be immaterial. The Company continues to assert that certain historical book over tax outside basis differences primarily related to unremitted foreign earnings are permanently reinvested. The Company's intent is to only make distributions from its foreign subsidiaries in the future when they can be made at no or an immaterial net tax cost. Unremitted foreign earnings total approximately $141 million. The Company does not expect taxes related to the unremitted foreign earnings to be material if they were distributed which would primarily consist of foreign withholding taxes.

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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=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 http://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 http://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 http://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 http://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 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 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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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