Income Taxes |
9 Months Ended |
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Dec. 31, 2022 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The Company computes its interim provision for income taxes by applying the estimated annual effective tax rate to income from operations and adjusts the provision for discrete tax items occurring in the period. The Company’s effective tax rate for the three months ended December 31, 2022 was 51.1% compared to 16.2% for the three months ended December 31, 2021. The Company’s effective tax rate for the nine months ended December 31, 2022 was 56.8% compared to 5.2% for the nine months ended December 31, 2021. The increase in the effective tax rate for both the three months ended December 31, 2022 and 2021 and the nine months ended December 31, 2022 and 2021 is primarily due to a decrease in share-based compensation windfall benefits as well as effects of the new requirement under Section 174 of the Internal Revenue Code (“IRC”) to capitalize and amortize research and development expenses in the U.S. The capitalization of research and development expenses resulted in an increase to the Company’s taxable income and foreign derived intangible income (“FDII”), resulting in a corresponding increase in the Company’s FDII deduction. However, no tax benefit is recognized for the deferred tax asset established for these capitalized research and development expenses due to the Company’s valuation allowance position in the U.S. Based on the Company’s review of both positive and negative evidence regarding the realizability of deferred tax assets at December 31, 2022, a valuation allowance continues to be recorded against certain deferred tax assets in the U.S. based upon the conclusion that it was more likely than not that these assets would not be realized. The valuation allowance in the U.S. at December 31, 2022 relates primarily to capitalized development costs, share-based compensation, accrued interest and foreign tax credits. Given the Company’s current earnings and anticipated future earnings, it is reasonably possible that within the next twelve months sufficient positive evidence may become available to allow the Company to conclude that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets. However, the exact timing and amount of the valuation allowance release are subject to change based on the Company’s ability to generate U.S. taxable earnings and utilization of deferred tax assets.
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