PROVISION FOR INCOME TAXES |
9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Dec. 31, 2025 | |||||||
| Income Tax Disclosure [Abstract] | |||||||
| PROVISION FOR INCOME TAXES |
The Company generally computes its quarterly income tax provision under the effective tax rate method by applying an estimated anticipated annual effective rate to the Company's year-to-date earnings, except for significant and unusual or extraordinary transactions. Losses from jurisdictions for which no benefit can be recognized are excluded from the overall computations of the estimated annual effective tax rate and a separate estimated annual effective tax rate is computed and applied to earnings in the loss jurisdiction. Income tax provision for any significant and unusual or extraordinary transactions are computed and recorded in the period in which the specific transaction occurs. The effective rates for income taxes were (168.9)% and 83.3% for the three months ended December 31, 2025 and 2024, respectively. The change in the Company's effective tax rate was primarily driven by the impact of recording valuation allowances against the majority of forecasted fiscal year losses in the United States, and discrete items, including the recording of valuation allowances against previously recognized United States federal deferred tax assets. The effective rates for income taxes were (185.8)% and (7.5)% for the nine months ended December 31, 2025 and 2024, respectively. The change in the Company's effective tax rate was primarily driven by the impact of recording valuation allowances against the majority of forecasted fiscal year losses in the United States, and discrete items, including the recording of valuation allowances against previously recognized United States federal deferred tax assets. The United States enacted the budget reconciliation H.R. 1, referred to as One Big Beautiful Bill Act (“OBBBA”) on July 4, 2025. The OBBBA includes a broad range of tax reform provisions, including modifications to U.S. taxation on foreign earnings, the restoration of bonus depreciation and research expensing and other U.S. corporate tax provisions. While the Company is continuing to assess the impact of the legislation, it did not have a material impact to the Company’s financial statements for the three and nine months ended December 31, 2025. Valuation Allowance ASC Topic 740 "Income Taxes" ("Topic 740") requires an evidence based approach when assessing the realizability of deferred tax assets and the need for valuation allowance reserves against those assets. On a quarterly basis, the Company considers available positive and negative evidence, including historical operating performance and expectations of future operating performance when assessing the need for valuation allowances. Topic 740 requires that if the weight of negative evidence is greater than positive evidence, a valuation allowance should be established, which increases income tax expense in the period when such a determination is made. As previously disclosed, the Company has been actively monitoring potential detrimental impacts to the realizability of its U.S. federal deferred tax assets, including continued pressure of tariffs and pressure from the current global trade environment on forecasted short-term U.S. profitability. During the three months ended December 31, 2025, the Company expanded the 2025 restructuring plan and incurred additional litigation reserve expense related to the previously disclosed insurance carrier litigation described in Note 8. These recent developments have caused the negative evidence to outweigh the positive evidence, and therefore, in accordance with Topic 740, the Company has recorded valuation allowances on all U.S. federal deferred tax assets as of December 31, 2025. As of December 31, 2025, for the majority of the U.S. states and certain foreign taxing jurisdictions, the Company believes the weight of the negative evidence continues to outweigh the positive evidence regarding the realization of these deferred tax assets and has maintained valuation allowances against these assets. As of December 31, 2025, the Company achieved three-year cumulative taxable earnings in China. As a result of this significant positive evidence, the Company has released the valuation allowances recorded against its deferred tax assets in China.
|
||||||