v3.26.1
Income Taxes
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income Tax Provision
The components of income tax expense were as follows: 
 Fiscal Year Ended March 31,
 202620252024
Current
U.S. Federal$(94)$280 $229 
State and local67 90 117 
Foreign3 5 3 
Total current(24)375 349 
Deferred
U.S. Federal61 (73)(94)
State and local(26)(18)(6)
Foreign— — (1)
Total deferred35 (91)(101)
Total income tax expense$11 $284 $248 
Reconciliation of Effective Income Tax Rate
As discussed in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, prospectively as of March 31, 2026. Differences between the effective income tax rate and the statutory U.S. federal income tax rate are as follows:
2026
AmountRate
Income tax expense computed at U.S. Federal statutory rate$181 21.0%
State and local income taxes, net of federal income tax effect (1)
31 3.6%
Effect of Cross Border Taxation:
Foreign Derived Intangible Income (FDII)(29)(3.4)%
Other(3)(0.3)%
Research and development and other federal credits(103)(12.0)%
Nontaxable and non-deductible items10 1.2%
Changes in uncertain tax positions(80)(9.3)%
Other adjustments4 0.5%
Income tax expense at the effective income tax rate$11 1.3%
(1) State taxes in Virginia and Maryland made up the majority (greater than 50%) of the tax effect in this category for fiscal 2026.
The reconciliation from federal income tax expense computed using the statutory federal income tax rate to federal income tax expense at our effective income tax rate, prior to the adoption of ASU 2023-09, is shown below for the comparative periods:
20252024
Income tax expense computed at U.S. Federal statutory rate$256 $179 
Increases (reductions) resulting from:
State and local income taxes, net of federal income tax effect55 85 
Foreign income taxes, net of federal tax — (8)
Non-deductible expenses, including non-deductible penalties7 5 
Excess tax benefits from stock-based compensation(6)(10)
Research and development and other federal credits(40)(31)
Executive compensation - 162(m)7 6 
Foreign Derived Intangible Income (FDII)(13)(14)
Changes in uncertain tax positions (including indirect effects)27 38 
Other(9)(2)
Income tax expense at the effective income tax rate$284 $248 
Tax Receivables and Payables
The Company has both a current income tax receivable ($88 million classified as prepaid taxes) and an income tax payable ($10 million classified as other current liabilities) on its consolidated balance sheet as of March 31, 2026. In addition, as of March 31, 2026, the Company has $178 million classified as other long-term assets on its consolidated balance sheet related to the amended U.S. federal return refund claims for research and development tax credits and the carryback claim for the fiscal 2021 net operating loss.
Cash paid for taxes
The amount of cash income taxes paid by the Company were as follows:
Fiscal Year Ended March 31,
2026
U.S. Federal$— 
State and local:
District of Columbia24 
Maryland17 
Virginia37 
All other states20 
Foreign5 
Total income taxes paid, net of refunds received$103 
Income tax payments, net of refunds received, were $379 million and $336 million for the years ended March 31, 2025 and 2024, respectively.
Deferred Income Taxes
The significant components of the Company’s deferred income tax assets and liabilities consisted of the following on the dates below:
 March 31,
 20262025
Deferred tax assets:
Accrued expenses$68 $66 
Deferred compensation60 59 
Stock-based compensation12 12 
Postretirement benefits46 47 
Net operating loss and other carryforwards206 9 
Research and development expenditures and indirect effects98 335 
State tax credits45 1 
Operating lease liabilities52 62 
Other6 12 
Total gross deferred tax assets593 603 
Less: valuation allowance(10)(9)
Total net deferred income tax assets583 594 
Deferred tax liabilities:
Unbilled receivables(90)(89)
Intangible assets(112)(100)
Property and equipment(33)(25)
Operating lease right-of-use assets(38)(46)
Other(16)(2)
Total deferred tax liabilities(289)(262)
Net deferred tax asset$294 $332 
In July 2025, the One Big Beautiful Bill Act (“OBBB”) was enacted, introducing significant amendments to the U.S. federal income tax code, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, restoration of favorable tax treatment for certain business provisions including the immediate expensing of domestic research and development expenditures, a change in the benefit of the research and development tax credit, restoration of full expensing for qualified machinery, equipment and other short-lived assets, as well as several modifications to international tax provisions. Certain provisions are effective for fiscal 2026 and the Company has recognized the income tax effects of those provisions herein, while other provisions are effective in future fiscal years.
Deferred tax balances arise from temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will not be realized. In determining if the Company's deferred tax assets are realizable, management considers all positive and negative evidence, including the history of generating financial reporting earnings, future reversals of existing taxable temporary differences, projected future taxable income, as well as any tax planning strategies.
Tax Credit, Loss and Other Carryforwards
As of March 31, 2026 and 2025, the Company had available federal, state, and foreign net operating loss (“NOL carryforwards”) of $206 million and $9 million, respectively, that may be applied against future taxable income. The federal net operating loss consists of $1 million attributable to an acquisition and will begin to expire in fiscal 2037 and $192 million generated in fiscal 2026 that do not expire. The Company recorded a partial valuation allowance against those federal, state and foreign net operating losses it believes will expire prior to utilization.
As of March 31, 2026 and 2025, the Company had tax credit carryforwards of $45 million and $1 million, respectively, that may be applied against future taxable income. These credits include $40 million of research and development and other credits that begin to expire in fiscal 2029, and the majority expire in fiscal 2046.
Uncertain Tax Positions
The Company maintains reserves for uncertain tax positions (“UTP”) related to unrecognized income tax benefits. These reserves involve judgment and estimation and are evaluated by management based on the best information available including changes in tax laws and other information. As of March 31, 2026, 2025, and 2024, the Company has recorded $75 million, $142 million, and $115 million, respectively, of reserves for UTPs which include potential tax benefits of $71 million, $125 million, and $104 million, respectively, that, when recognized, impact the effective tax rate. As of March 31, 2026 and 2025, $20 million and $3 million, respectively, of the reserve is reflected as a reduction to deferred taxes and the remaining balance is recorded as a component of other long-term liabilities in the consolidated balance sheet.
A reconciliation of the beginning and ending amount of potential tax benefits for the periods presented is as follows: 
 March 31,
 202620252024
Beginning of year$125 $104 $548 
Increases in prior year position21 4 41 
Increases in current year position17 17 13 
Decreases in prior year position(20)— (474)
Settlements with taxing authorities(63)— (24)
Lapse of statute of limitations(9)— — 
End of year$71 $125 $104 
In addition to the unrecognized tax benefits noted above, the Company recognized accrued interest and penalties of $(16) million for fiscal 2026, and $7 million for both fiscal 2025 and 2024, related to the reserves for uncertain tax positions in the income tax provision. The total reserve for uncertain tax positions includes accrued penalties and interest of approximately $4 million, $20 million and $13 million at March 31, 2026, 2025, and 2024, respectively.
With respect to significant current year activity, the UTP reduction during fiscal 2026 is primarily related to an $86 million adjustment (including interest) from the completion of Internal Revenue Service (the “IRS”) examination procedures of the Company's amended federal income tax returns through fiscal year 2021 recorded in the first quarter. The Company also accrued $(24) million of interest income (net of tax effect) on the related long-term receivable for the refund requested in the amended returns. Due to the magnitude of the refund requested in the amended returns, the case will be referred to the Joint Committee on Taxation (the “JCT”) for further evaluation, as required by law for tax refunds or reductions exceeding $5 million. While the JCT has not yet reviewed this case, management does not anticipate that the resolution of this review will have a material adverse effect on the Company's financial position or results of operations.
During fiscal 2024, the Company reversed reserves for uncertain tax positions related to the required capitalization of research and development expenditures originally recorded in fiscal 2023, which was reversed in fiscal 2024 as a result of additional guidance provided by the IRS.
The Company is subject to taxation in the United States and various state and foreign jurisdictions. As of March 31, 2026, the Company's tax years ended March 31, 2016 and forward are open and subject to examination by the federal tax authorities. The Company is currently under federal audit by the Internal Revenue Service (“IRS”) for fiscal years 2016, 2017 and 2019-2021. The other jurisdictions currently open or under examination are not considered to be material.
It is difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible outcomes cannot be made. Items that may cause changes to unrecognized tax benefits include the amount of research and development tax credits available in the United States and various state jurisdictions. These changes could result from the completion of the ongoing IRS examination, the expiration of the statutes of limitations, additional regulatory guidance or other unforeseen circumstances.