COMMVAULT SYSTEMS INCCVLT
COMMVAULT SYSTEMS INC Income Taxes Disclosure
Income Taxes
The components of income before income taxes were as follows:
| Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Domestic | $ | 64,856 | $ | 56,342 | $ | 62,082 | |||||||||||
| Foreign | 27,268 | 24,711 | 21,531 | ||||||||||||||
| $ | 92,124 | $ | 81,053 | $ | 83,613 | ||||||||||||
The components of income tax expense (benefit) were as follows:
| Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 950 | $ | 11,983 | $ | 7,845 | |||||||||||
| State | 1,158 | 2,971 | 4,242 | ||||||||||||||
| Foreign | 11,659 | 13,467 | 12,220 | ||||||||||||||
| Total current | 13,767 | 28,421 | 24,307 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 3,430 | (20,989) | (82,773) | ||||||||||||||
| State | 194 | 1,543 | (19,740) | ||||||||||||||
| Foreign | 4,076 | (4,028) | (7,087) | ||||||||||||||
| Total deferred | 7,700 | (23,474) | (109,600) | ||||||||||||||
| Total income tax expense (benefit) | $ | 21,467 | $ | 4,947 | $ | (85,293) | |||||||||||
A reconciliation of the statutory tax rates and the effective tax rates for the year ended March 31, 2026 is presented below under the disclosure requirements of ASU No. 2023‑09, which the Company adopted on a prospective basis. Reconciliations for the years ended March 31, 2025 and 2024 continue to be presented in accordance with prior guidance.
| Year Ended March 31, | |||||||||||
| 2026 | |||||||||||
| Amount | Percent | ||||||||||
U.S. federal statutory tax rate | $ | 19,346 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | (262) | (0.3) | % | ||||||||
Foreign tax effects | |||||||||||
| Brazil | |||||||||||
| Withholding taxes | 2,117 | 2.3 | % | ||||||||
| Poland | |||||||||||
Changes in valuation allowances | 1,018 | 1.1 | % | ||||||||
| Other | (12) | — | % | ||||||||
| Other foreign jurisdictions | 3,427 | 3.7 | % | ||||||||
Effect of cross-border tax laws | |||||||||||
| Global intangible low-taxed income | 699 | 0.8 | % | ||||||||
| Tax Credits | |||||||||||
| Research and development tax credits | (6,094) | (6.6) | % | ||||||||
| Foreign tax credit | (322) | (0.3) | % | ||||||||
Changes in valuation allowances | 724 | 0.8 | % | ||||||||
Nontaxable or nondeductible items | |||||||||||
| Stock-based compensation | (1,163) | (1.3) | % | ||||||||
| Other | 1,748 | 1.9 | % | ||||||||
Worldwide changes in unrecognized tax benefits | 175 | 0.2 | % | ||||||||
Other adjustments | 66 | — | % | ||||||||
| Effective income tax expense | $ | 21,467 | 23.3 | % | |||||||
(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Florida, Maryland, Minnesota and New Jersey for the year ended March 31, 2026.
| Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Statutory federal income tax expense rate | 21.0 | % | 21.0 | % | |||||||
| State and local income tax expense, net of federal income tax effect | — | % | 2.4 | % | |||||||
| Foreign earnings taxed at different rates | 5.6 | % | 5.7 | % | |||||||
| U.S. tax on GILTI & FDII | (4.2) | % | (3.3) | % | |||||||
| Domestic permanent differences including acquisition items | 2.9 | % | 1.1 | % | |||||||
| Foreign tax credits | (4.1) | % | (2.5) | % | |||||||
| Research credits | (6.0) | % | (9.3) | % | |||||||
| Tax reserves | 3.1 | % | — | % | |||||||
| Valuation allowance | 6.8 | % | (125.3) | % | |||||||
| Enacted tax law changes | (2.8) | % | (0.4) | % | |||||||
| Stock-based compensation | (13.4) | % | 6.7 | % | |||||||
| Other differences, net | (2.8) | % | 1.9 | % | |||||||
| Effective income tax expense (benefit) | 6.1 | % | (102.0) | % | |||||||
The significant components of our deferred tax assets and liabilities are as follows:
| March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 7,920 | $ | 6,873 | |||||||
| Stock-based compensation | 6,908 | 5,729 | |||||||||
| Deferred revenue | 38,209 | 33,125 | |||||||||
| Tax credits | 34,893 | 26,206 | |||||||||
| Accrued expenses | 2,235 | 1,576 | |||||||||
| Allowance for doubtful accounts and other reserves | 1,270 | 1,117 | |||||||||
| R&D Capitalization under IRC § 174 | 78,260 | 83,826 | |||||||||
| Depreciation and amortization | 4,651 | 9,074 | |||||||||
| Capped call | 20,979 | — | |||||||||
| Other | 12,928 | 6,162 | |||||||||
| Less: valuation allowance | (25,667) | (23,550) | |||||||||
| Total deferred tax assets | 182,586 | 150,138 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Withholding taxes | (217) | (289) | |||||||||
| Deferred commissions | (21,650) | (16,011) | |||||||||
| Other | (8,518) | (1,844) | |||||||||
| Total deferred tax liabilities | (30,385) | (18,144) | |||||||||
| Net deferred tax asset | $ | 152,201 | $ | 131,994 | |||||||
Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. At March 31, 2026 and 2025, we recorded valuation allowances of $25,667 and $23,550, respectively, which reflect uncertainties around our ability to generate sufficient income in certain jurisdictions to utilize our net deferred tax assets which primarily relate to Federal Foreign Tax Credits and NJ State R&D Credits. We believe it is more likely than not that we will have sufficient taxable income to realize our remaining deferred tax assets.
For federal income tax purposes, beginning in our fiscal year 2023, we were required to capitalize and amortize domestic research and development ("R&D") expenditures over five years and foreign R&D over fifteen years (such expenditures were previously deducted as incurred). Our cash flows from operations are adversely affected due to significantly higher cash tax payments in fiscal years 2023 to 2025 accordingly. The One Big Beautiful Bill Act, enacted on July 4, 2025, includes several corporate tax provisions relevant to U.S. businesses. Included in this legislation are provisions that allow for the immediate expensing of domestic R&D expenses, extensions of bonus depreciation, and modifications to the international tax regimes. The provisions in the legislation are generally effective beginning in our fiscal year 2026 and have been included in our operating results. Our cash flows from operations are positively affected due to lower federal cash tax payments in fiscal year 2026.
At March 31, 2026, we had $1,425 remaining federal net operating loss ("NOL") carryforwards and state NOL carryforwards of $1,467 which expire over various years beginning in March 2033 depending on the jurisdiction. As of March 31, 2026, we had foreign NOL carryforwards of $3,177 that will expire over various years beginning in March 2028 depending on the jurisdiction and $51,583 that will not expire. As of March 31, 2026, we had no federal capital loss carryforwards. At March 31, 2026, we had foreign capital loss carryforwards of $816 that will not expire.
At March 31, 2026, we had $7,107 remaining federal R&D tax credit carryforwards and state R&D tax credit carryforwards of approximately $28,734. The NJ R&D credit carryforwards of $18,560 expire over various years beginning from March 2026 through March 2041. The California R&D credits of $10,174 do not expire.
At March 31, 2026, we had federal foreign tax credits ("FTC") carryforwards of approximately $7,644 which are expected to expire from March 2030 through March 2034. We had no foreign FTC.
We conduct business globally and as a result, file income tax returns in the United States and in various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. The following table summarizes the tax years subject to income tax examinations by tax authorities as of March 31, 2026. The years subject to income tax examination in our foreign jurisdictions cover the maximum time period with respect to these jurisdictions. Due to NOLs, in some cases the tax years continue to remain subject to examination with respect to such NOLs.
| Tax Jurisdiction | Years Subject to Income Tax Examination | ||||
| U.S. Federal | Fiscal 2022 - Present | ||||
| Foreign jurisdictions | Fiscal 2015 - Present | ||||
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in each of our tax jurisdictions. The number of years with open tax audits varies depending on the tax jurisdiction. A number of years may lapse before a particular matter is audited and finally resolved. A summary of the changes in the amount of unrecognized tax benefits is as follows:
| Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Beginning balance of unrecognized tax benefits | $ | 11,748 | $ | 9,673 | $ | 9,388 | |||||||||||
| Additions for prior year tax positions | 68 | 1,391 | 3 | ||||||||||||||
| Reductions for prior year tax positions and lapse in statute of limitations | (1,179) | (471) | (220) | ||||||||||||||
| Additions for current year tax positions | 1,195 | 1,155 | 502 | ||||||||||||||
| Additions for tax positions related to purchase accounting | 5,795 | — | — | ||||||||||||||
| Ending balance of unrecognized tax benefits | $ | 17,627 | $ | 11,748 | $ | 9,673 | |||||||||||
Interest income, expense and penalties related to unrecognized tax benefits are recorded in income tax expense in the Consolidated Statements of Operations. In the years ended March 31, 2026, 2025, and 2024, the impact related to interest expense, interest income and penalties was not significant.
The amount of cash taxes paid for the year ended March 31, 2026 was as follows:
| Total | |||||
| Federal | $ | 3,184 | |||
| State | 3,316 | ||||
| Foreign | |||||
| Canada | 2,441 | ||||
| United Kingdom | (2,249) | ||||
| India | 2,972 | ||||
| Other | 3,948 | ||||
| Income taxes, net of amounts refunded | $ | 13,612 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 11, 2026 | Showing above |
| 2025 | May 5, 2025 | |
| 2024 | May 13, 2024 | |
| 2023 | May 5, 2023 | |
| 2022 | May 6, 2022 | |
| 2021 | May 13, 2021 | |
| 2020 | May 15, 2020 | |
| 2019 | May 2, 2019 | |
| 2018 | May 3, 2018 | |
| 2017 | May 5, 2017 | |
| 2016 | May 6, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.