XML 33 R17.htm IDEA: XBRL DOCUMENT v3.22.1
INCOME TAXES
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXESFor the years ended March 31, 2022, 2021, and 2020, the Company recorded a benefit for income taxes of $0.4 million, provision for income taxes of $0.8 million, and $0.8 million, respectively. For the year ended March 31, 2022, the Company recorded a deferred tax benefit of $1.2 million related to the release of an existing valuation allowance as a result of change in circumstances caused by the acquisition of Fuze. The components of the consolidated provision for income taxes for fiscal 2022, 2021, and 2020 consisted of the following:
 March 31,
Current:202220212020
Federal$— $— $— 
State145 31 185 
Foreign721 812 647 
Total current tax provision866 843 832 
Deferred
Federal(984)— — 
State(269)— — 
Foreign— — — 
Total deferred tax provision(1,253)— — 
Income tax (benefit) provision$(387)$843 $832 
The Company's loss from continuing operations before income taxes included $12.9 million, $15.3 million, and $9.0 million of foreign subsidiary income for the years ended March 31, 2022, 2021, and 2020, respectively. The Company is permanently reinvesting the earnings of its profitable foreign subsidiaries. The Company intends to reinvest these profits in expansion of overseas operations. If the Company were to remit these earnings, the tax impact would be immaterial.
Deferred tax assets and (liabilities) were comprised of the following:
 March 31,
 20222021
Deferred tax assets
Net operating loss carryforwards$350,242 $145,655 
Research and development and other credit carryforwards26,127 22,794 
Stock-based compensation14,877 12,669 
Reserves and allowances23,880 6,198 
Lease liability20,614 22,424 
Fixed assets and intangibles836 6,091 
Gross deferred tax assets436,576 215,831 
Valuation allowance(349,093)(160,450)
Total deferred tax assets$87,483 $55,381 
Deferred tax liabilities
Intangibles(28,529)— 
Deferred sales commissions(32,857)(27,166)
Convertible debt(12,066)(12,695)
Lease asset(14,145)(15,520)
Net deferred taxes$(114)$— 
The Company assesses the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of deferred tax assets will not be realized. For the year ended March 31, 2022, the Company continues to maintain a full valuation allowance against its deferred tax assets as it considered the cumulative losses in recent periods to be substantial negative evidence. At March 31, 2022, management determined that a valuation allowance of approximately $349.1 million was needed, compared with approximately $160.5 million as of March 31, 2021.
At March 31, 2022, the Company had federal net operating loss carryforwards of approximately $1,322.1 million, of which $490.5 million are related to years prior to fiscal 2019 and begin to expire in 2023. The remaining $831.6 million carry forward indefinitely. As of March 31, 2022, the Company has state net operating loss carry-forwards of $1,067.9 million, which expire at various dates between 2023 and 2042. In addition, at March 31, 2022, the Company had research and development credit carryforwards for federal and California tax reporting purposes of approximately $17.3 million and $19.6 million, respectively. The federal income tax credit carryforwards will expire at various dates between 2023 and 2042, while the California income tax credits will carry forward indefinitely. A reconciliation of the Company's provision (benefit) for income taxes to the amounts computed using the statutory United States federal income tax rate is as follows:
 Years Ended March 31,
 202220212020
Tax benefit at statutory rate$(36,909)$(34,492)$(36,163)
State income taxes before valuation allowance, net of federal effect(7,754)(7,445)(7,680)
Foreign tax rate differential(2,056)(2,206)(1,422)
Research and development credits(3,362)(4,078)(3,892)
Change in valuation allowance49,620 47,225 51,741 
Compensation/option differences(6,788)(5,045)(6,584)
Non-deductible compensation7,606 6,194 3,017 
Other(744)690 1,815 
Total income tax provision (benefit)$(387)$843 $832 
For the years ended March 31, 2022, 2021, and 2020, the statutory federal rate of 21% was used.
The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 Unrecognized Tax Benefits
 202220212020
Balance at beginning of year$7,053 $6,115 $5,033 
Gross increases - tax position in prior period1,918 — — 
Gross increases - tax position related to the current year951 1,140 1,082 
Settlements(63)— — 
Lapse of statute of limitations(19)(202)— 
Currency10 — — 
Balance at end of year$9,850 $7,053 $6,115 
At March 31, 2022, the Company had unrecognized tax benefits of $9.9 million, all of which, if recognized, would favorably affect the company's effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.
The Company's policy for recording interest and penalties associated with tax examinations is to record such items as a component of operating expense income before taxes. For the year ended March 31, 2022, the Company recognized $0.2 million in penalty and interest related to unrecognized tax benefits. During the years ended March 31, 2021 and 2020, the Company did not recognize any interest or penalties related to unrecognized tax benefits.
Utilization of the Company's net operating loss and tax credit carryforwards can become subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. The Company has performed an analysis of its changes in ownership under Section 382 of the Internal Revenue Code. The Company currently believes that the Section 382 limitation will not limit utilization of the carryforwards prior to their expiration, with the exception of certain acquired loss and tax credit carryforwards.
The Company files United States federal and state income tax returns in jurisdictions with varying statutes of limitations. Due to the Company’s net operating loss and tax credit carryforwards, the fiscal years 2002 and forward generally remain subject to examination by federal and most state tax authorities.