DXC Technology CoDXC
DXC Technology Co Income Taxes Disclosure
Income Taxes
The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the United States, are as follows:
| Fiscal Years Ended | ||||||||||||||||||||
| (in millions) | March 31, 2026 | March 31, 2025 | March 31, 2024 | |||||||||||||||||
| Domestic entities | $ | (137) | $ | (84) | $ | 53 | ||||||||||||||
| Entities outside the United States | 455 | 714 | 56 | |||||||||||||||||
| Total | $ | 318 | $ | 630 | $ | 109 | ||||||||||||||
The income tax expense (benefit) on income (loss) from continuing operations is comprised of:
| Fiscal Years Ended | ||||||||||||||||||||
| (in millions) | March 31, 2026 | March 31, 2025 | March 31, 2024 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 51 | $ | 104 | $ | 94 | ||||||||||||||
| State | (12) | (14) | 57 | |||||||||||||||||
| Foreign | 225 | 179 | 288 | |||||||||||||||||
| 264 | 269 | 439 | ||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | (16) | (102) | (186) | |||||||||||||||||
| State | 19 | (28) | (38) | |||||||||||||||||
| Foreign | 23 | 95 | (192) | |||||||||||||||||
| 26 | (35) | (416) | ||||||||||||||||||
Total income tax expense (benefit) | $ | 290 | $ | 234 | $ | 23 | ||||||||||||||
The current federal tax expense for fiscal years 2026, 2025, and 2024 includes a $0 million, $0 million and $(21) million transition tax benefit, respectively. The current expense for fiscal years 2026, 2025, and 2024, includes interest and penalties of $51 million, $14 million, and $10 million, respectively, for uncertain tax positions.
In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $14 million tax indemnification receivable related to uncertain tax positions, a $25 million tax indemnification receivable related to other tax payables, and a $86 million tax indemnification payable related to other tax receivables.
In connection with the USPS Separation, the Company entered into a tax matters agreement with Perspecta Inc. (including its successors and permitted assigns, "Perspecta"). The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE. The Company remains liable to HPE for tax receivables transferred to Perspecta related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $12 million tax indemnification receivable from Perspecta related to other tax receivables.
In connection with the sale of its healthcare provider software business ("HPS"), the Company entered into a tax matters agreement with Dedalus. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of the HPS business.
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 1, Summary of Significant Accounting Policies, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended March 31, 2026, was as follows:
| Fiscal Year Ended 2026 | ||||||||||||||
| (in millions) | Amount | Percentage | ||||||||||||
| U.S federal statutory tax rate | $ | 67 | 21.0 | % | ||||||||||
State and local income taxes, net of federal income tax effect (1) | 7 | 2.2 | % | |||||||||||
| Foreign tax effects | ||||||||||||||
| Argentina | ||||||||||||||
| Change in valuation allowance | (5) | (1.6) | % | |||||||||||
| Australia | ||||||||||||||
| Statutory tax rate difference | 4 | 1.3 | % | |||||||||||
| Other | 3 | 0.9 | % | |||||||||||
| Belgium | 4 | 1.3 | % | |||||||||||
| Brazil | ||||||||||||||
| Withholding taxes | 8 | 2.5 | % | |||||||||||
| Other | 4 | 1.3 | % | |||||||||||
| Canada | ||||||||||||||
| Canada province tax | 7 | 2.2 | % | |||||||||||
| Withholding taxes | (6) | (1.9) | % | |||||||||||
| Other | (3) | (0.9) | % | |||||||||||
| China | ||||||||||||||
| Change in valuation allowance | 6 | 1.9 | % | |||||||||||
| Other | 1 | 0.3 | % | |||||||||||
| Costa Rica | ||||||||||||||
| Expired tax incentive | 4 | 1.3 | % | |||||||||||
| Denmark | ||||||||||||||
| Change in valuation allowance | 5 | 1.6 | % | |||||||||||
| France | ||||||||||||||
| Change in valuation allowance | (3) | (0.9) | % | |||||||||||
| Other | 7 | 2.2 | % | |||||||||||
| Germany | ||||||||||||||
| Statutory tax rate difference | (4) | (1.3) | % | |||||||||||
| German trade tax | 12 | 3.8 | % | |||||||||||
| Other | 6 | 1.9 | % | |||||||||||
| India | ||||||||||||||
| Statutory tax rate difference | 8 | 2.5 | % | |||||||||||
| Withholding taxes | 28 | 8.8 | % | |||||||||||
| Other | (2) | (0.6) | % | |||||||||||
| Italy | ||||||||||||||
| Change in valuation allowance | (5) | (1.6) | % | |||||||||||
| Legal entity liquidation | 6 | 1.9 | % | |||||||||||
| Other | 11 | 3.5 | % | |||||||||||
| Japan | 5 | 1.6 | % | |||||||||||
| Luxembourg | ||||||||||||||
| Change in valuation allowance | 28 | 8.8 | % | |||||||||||
| Other | (4) | (1.3) | % | |||||||||||
| Netherlands | ||||||||||||||
| Nontaxable or nondeductible interest | 4 | 1.3 | % | |||||||||||
| Other | 1 | 0.3 | % | |||||||||||
| Panama | ||||||||||||||
| Statutory tax rate difference | 4 | 1.3 | % | |||||||||||
| Philippines | 3 | 0.9 | % | |||||||||||
| Singapore | 5 | 1.6 | % | |||||||||||
| United Kingdom | ||||||||||||||
| Tax audits | (4) | (1.3) | % | |||||||||||
| Other | (2) | (0.6) | % | |||||||||||
| Other foreign jurisdictions | 18 | 5.7 | % | |||||||||||
| Effect of cross-border tax laws | ||||||||||||||
| Subpart F income | 21 | 6.6 | % | |||||||||||
| Withholding taxes | (4) | (1.3) | % | |||||||||||
| Gross-up for foreign taxes deemed paid | 5 | 1.6 | % | |||||||||||
| Base erosion and anti-abuse tax | 5 | 1.6 | % | |||||||||||
| Other | 5 | 1.6 | % | |||||||||||
| Tax Credits | ||||||||||||||
| Foreign tax credits | (5) | (1.6) | % | |||||||||||
| Research and development tax credits | (11) | (3.5) | % | |||||||||||
| Change in valuation allowance | 1 | 0.3 | % | |||||||||||
| Nontaxable or nondeductible Items | ||||||||||||||
| Share-based payment awards | 14 | 4.4 | % | |||||||||||
| Executive compensation | 4 | 1.3 | % | |||||||||||
| Indemnification costs | (7) | (2.2) | % | |||||||||||
| Other | (3) | (0.9) | % | |||||||||||
| Change in unrecognized tax benefits | 50 | 15.7 | % | |||||||||||
| Other adjustments | ||||||||||||||
| Worthless stock deduction | (25) | (7.9) | % | |||||||||||
| Interest on tax receivables | (4) | (1.3) | % | |||||||||||
| Other | 16 | 4.9 | % | |||||||||||
| Effective Tax Rate | $ | 290 | 91.2 | % | ||||||||||
________________
(1) State taxes in Virginia contributed to the majority of the tax effect in this category.
The major elements contributing to the difference between the U.S. federal statutory tax rate and the effective tax rate ("ETR") for continuing operations in accordance with the guidance prior to the adoption of ASU 2023-09 is below.
Fiscal Years Ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | |||||||||||||
| Statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| State income tax, net of federal tax | 0.3 | 3.7 | ||||||||||||
| Foreign tax rate differential | 23.0 | (152.3) | ||||||||||||
| Change in valuation allowances | (3.5) | 146.8 | ||||||||||||
| Income tax and foreign tax credits | (13.3) | (92.7) | ||||||||||||
| Change in uncertain tax positions | (8.3) | — | ||||||||||||
| Withholding taxes | 2.1 | 58.7 | ||||||||||||
| U.S. tax on foreign income | 9.4 | 35.8 | ||||||||||||
Excess tax benefit or expense for stock compensation | 1.1 | (0.9) | ||||||||||||
| Capitalized transaction costs | — | 0.9 | ||||||||||||
| Base erosion and transition taxes | 0.3 | (26.6) | ||||||||||||
| Impact of business divestitures | 0.2 | (5.5) | ||||||||||||
| Indemnification costs | 0.5 | 3.7 | ||||||||||||
Interest on tax receivables | (2.5) | — | ||||||||||||
Tax audits | 1.9 | 22.0 | ||||||||||||
| Other items, net | 4.9 | 6.5 | ||||||||||||
| Effective tax rate | 37.1 | % | 21.1 | % | ||||||||||
In fiscal 2025, the ETR was primarily impacted by:
•The global mix of income and changes in foreign statutory tax rates, which increased the foreign tax rate differential and the ETR by $145 million and 23.0%, respectively.
•Income tax and foreign tax credits, which decreased income tax expense and the ETR by $84 million and 13.3%, respectively, offset by tax expense on U.S. international tax inclusions, which increased tax expense and the ETR by $59 million and 9.4%, respectively.
•The tax benefit of changes in uncertain tax positions related to the expiration of the statute of limitations and capitalized research and experimental expenditures, offset by the impact of increases in other uncertain tax positions and accrued interest, which decreased income tax expense and the ETR by $52 million and 8.3%, respectively.
In fiscal 2024, the ETR was primarily impacted by:
•Changes in foreign jurisdictional losses that decreased the ETR by $160 million and 146.8%, respectively, with an offsetting increase in the ETR due to an increase in the valuation allowance of the same amount.
•Income tax and foreign tax credits, which decreased income tax expense and decreased the ETR by $101 million and 92.7%, respectively, offset by tax expense on U.S. international tax inclusions, which increased tax expense and increased the ETR by $39 million and 35.8%, respectively.
•Foreign withholding taxes, which increased income tax expense and increased the ETR by $64 million and 58.7%, respectively.
The deferred tax assets (liabilities) were as follows:
| As of | ||||||||||||||
| (in millions) | March 31, 2026 | March 31, 2025 | ||||||||||||
| Deferred tax assets | ||||||||||||||
| Tax loss/credit carryforwards | 2,780 | 2,477 | ||||||||||||
| Accrued interest | 29 | 19 | ||||||||||||
Operating lease liabilities | 150 | 132 | ||||||||||||
Contract accounting | 95 | 122 | ||||||||||||
| Depreciation and amortization | 120 | 252 | ||||||||||||
| Other assets | 375 | 310 | ||||||||||||
| Total deferred tax assets | 3,549 | 3,312 | ||||||||||||
| Valuation allowance | (2,438) | (2,242) | ||||||||||||
| Net deferred tax assets | 1,111 | 1,070 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Operating right-of-use asset | (144) | (127) | ||||||||||||
| Investment basis differences | (4) | (10) | ||||||||||||
| Employee benefits | (123) | (82) | ||||||||||||
Other liabilities | (115) | (133) | ||||||||||||
| Total deferred tax liabilities | (386) | (352) | ||||||||||||
| Total net deferred tax assets (liabilities) | $ | 725 | $ | 718 | ||||||||||
Income tax related assets are included in the accompanying balance sheets as follows:
| As of | ||||||||||||||||||||
| (in millions) | Balance Sheet Line Item | March 31, 2026 | March 31, 2025 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Income tax receivables and prepaid taxes | Receivables and contract assets, net | $ | 53 | $ | 43 | |||||||||||||||
| $ | 53 | $ | 43 | |||||||||||||||||
| Non-current: | ||||||||||||||||||||
| Income taxes receivable and prepaid taxes | Other assets | $ | 267 | $ | 264 | |||||||||||||||
| Deferred tax assets | Deferred income taxes, net | 802 | 819 | |||||||||||||||||
| $ | 1,069 | $ | 1,083 | |||||||||||||||||
| Total | $ | 1,122 | $ | 1,126 | ||||||||||||||||
Income tax related liabilities are included in the accompanying balance sheet as follows:
| As of | ||||||||||||||||||||
| (in millions) | Balance Sheet Line Item | March 31, 2026 | March 31, 2025 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Income taxes payable | Income taxes payable | $ | (53) | $ | (64) | |||||||||||||||
| $ | (53) | $ | (64) | |||||||||||||||||
| Non-current: | ||||||||||||||||||||
| Deferred taxes | Non-current income tax liabilities and deferred income taxes | $ | (77) | $ | (101) | |||||||||||||||
| Income taxes payable | Non-current income tax liabilities and deferred income taxes | (28) | (55) | |||||||||||||||||
| Liability for uncertain tax positions | Non-current income tax liabilities and deferred income taxes | (397) | (339) | |||||||||||||||||
| $ | (502) | $ | (495) | |||||||||||||||||
| Total | $ | (555) | $ | (559) | ||||||||||||||||
Significant management judgment is required in determining the Company's provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. As of each reporting date, management weighs new evidence, both positive and negative, that could affect its view of the future realization of its net deferred tax assets. Objective verifiable evidence, which is historical in nature, carries more weight than subjective evidence, which is forward looking in nature.
A valuation allowance has been recorded against deferred tax assets of approximately $2,438 million as of March 31, 2026, due to uncertainties related to the ability to utilize these assets. In assessing whether its deferred tax assets are realizable, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts the valuation allowance accordingly. The Company considers all available positive and negative evidence including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent financial operations.
The net increase in the valuation allowance of $196 million in fiscal 2026, is primarily due to an adjustment for currency translation.
The following table provides information on the Company's various tax carryforwards:
| As of March 31, 2026 | As of March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Total | With No Expiration | With Expiration | Expiration Dates Through | Total | With No Expiration | With Expiration | Expiration Dates Through | ||||||||||||||||||||||||||||||||||||||||||
| Net operating loss carryforwards | ||||||||||||||||||||||||||||||||||||||||||||||||||
Federal | $ | 547 | $ | 547 | $ | — | N/A | $ | — | $ | — | $ | — | N/A | ||||||||||||||||||||||||||||||||||||
State | $ | 654 | $ | 229 | $ | 425 | 2045 | $ | 332 | $ | 161 | $ | 171 | 2045 | ||||||||||||||||||||||||||||||||||||
Foreign | $ | 11,090 | $ | 5,686 | $ | 5,404 | 2043 | $ | 10,369 | $ | 5,402 | $ | 4,967 | 2042 | ||||||||||||||||||||||||||||||||||||
| Tax credit carryforwards | ||||||||||||||||||||||||||||||||||||||||||||||||||
Federal | $ | 1 | $ | — | $ | 1 | 2036 | $ | — | $ | — | $ | — | N/A | ||||||||||||||||||||||||||||||||||||
State | $ | 8 | $ | — | $ | 8 | 2040 | $ | 5 | $ | — | $ | 5 | 2040 | ||||||||||||||||||||||||||||||||||||
Foreign | $ | 2 | $ | — | $ | 2 | 2039 | $ | 2 | $ | — | $ | 2 | 2038 | ||||||||||||||||||||||||||||||||||||
| Capital loss carryforwards | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal | $ | 42 | $ | 42 | $ | — | N/A | $ | 42 | $ | 42 | $ | — | N/A | ||||||||||||||||||||||||||||||||||||
| State | $ | 41 | $ | 41 | $ | — | N/A | $ | 47 | $ | 47 | $ | — | N/A | ||||||||||||||||||||||||||||||||||||
| Foreign | $ | 34 | $ | 34 | $ | — | N/A | $ | 34 | $ | 34 | $ | — | N/A | ||||||||||||||||||||||||||||||||||||
The Company also has federal and state 163(j) interest deduction carryforward attributes of approximately $23 million and $1,389 million, respectively, that have no expiration.
As of March 31, 2026, the Company had undistributed earnings from foreign subsidiaries that were not indefinitely reinvested and had a deferred tax liability of $16 million for the estimated taxes associated with the repatriation of these earnings. The Company also had undistributed earnings and other outside basis differences in foreign subsidiaries that were indefinitely reinvested for which no taxes have been provided and the quantification of the deferred tax liability, if any, was not practicable. If future events, including material changes in estimates of cash, working capital and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for taxes may apply, which could materially affect our future effective tax rate.
The Company accounts for income tax uncertainties in accordance with ASC 740 Income Taxes, which prescribes a recognition threshold and measurement criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC 740 also provides guidance on the accounting for and disclosure of liabilities for uncertain tax positions, interest, and penalties.
In accordance with ASC 740, the Company’s liability for uncertain tax positions was as follows:
| Fiscal Years Ended | ||||||||||||||
| (in millions) | March 31, 2026 | March 31, 2025 | ||||||||||||
| Tax | $ | 307 | $ | 291 | ||||||||||
| Interest | 168 | 117 | ||||||||||||
| Penalties | 3 | 3 | ||||||||||||
Reduction of receivables | (81) | (71) | ||||||||||||
| Net of tax attributes | — | (1) | ||||||||||||
| Total | $ | 397 | $ | 339 | ||||||||||
The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes):
| Fiscal Years Ended | ||||||||||||||||||||
| (in millions) | March 31, 2026 | March 31, 2025 | March 31, 2024 | |||||||||||||||||
| Balance at beginning of fiscal year | $ | 291 | $ | 361 | $ | 399 | ||||||||||||||
| Gross increases related to prior year tax positions | 34 | 37 | 14 | |||||||||||||||||
| Gross decreases related to prior year tax positions | (14) | (54) | (55) | |||||||||||||||||
| Gross increases related to current year tax positions | 4 | 15 | 8 | |||||||||||||||||
Gross decreases related to current year tax positions | — | (12) | — | |||||||||||||||||
| Settlements and statute of limitation expirations | (8) | (55) | (5) | |||||||||||||||||
| Foreign exchange and others | — | (1) | — | |||||||||||||||||
| Balance at end of fiscal year | $ | 307 | $ | 291 | $ | 361 | ||||||||||||||
The Company’s liability for uncertain tax positions at March 31, 2026, March 31, 2025, and March 31, 2024, includes $353 million, $336 million, and $365 million, respectively, related to amounts that, if recognized, would affect the effective tax rate (excluding related interest and penalties). The increase for fiscal 2026 is primarily due to the increase in the foreign currency loss tax case accrual, partially offset by the expiration of statute of limitations and changes in the uncertain tax positions related to research and experimental expenditures.
The Company recognizes interest accrued related to uncertain tax positions and penalties as a component of income tax expense. During the year ended March 31, 2026, the Company had a net increase in interest expense of $51 million ($38 million net of tax), no changes in accrued expense for penalties and, as of March 31, 2026, recognized a liability for interest of $168 million ($127 million net of tax) and penalties of $3 million. During the year ended March 31, 2025, the Company had a net increase in interest expense of $14 million ($11 million net of tax), no changes in accrued expense for penalties and, as of March 31, 2025, recognized a liability for interest of $117 million ($89 million net of tax) and penalties of $3 million. During the year ended March 31, 2024, the Company had a net increase in interest expense of $24 million ($18 million net of tax) and a net decrease in accrued expense for penalties of $14 million and, as of March 31, 2024, recognized a liability for interest of $103 million ($79 million net of tax) and penalties of $4 million.
The Company is currently under examination in several tax jurisdictions. A summary of the tax years that remain subject to examination in certain of the Company’s major tax jurisdictions are:
| Jurisdiction: | Tax Years that Remain Subject to Examination (Fiscal Year Ending): | |||||||
Australia | 2021 and forward | |||||||
| United States – Federal | 2009 through 2021, and 2023 forward | |||||||
| United States – Various States | 2009 and forward | |||||||
| Canada | 2010 and forward | |||||||
| France | 2017 and forward | |||||||
| Germany | 2010 and forward | |||||||
| India | 2001 and forward | |||||||
United Kingdom | 2020 and forward | |||||||
Tax Examinations
The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal years 2009 through the tax year ended October 31, 2018. With respect to CSC’s fiscal years 2009 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals. The IRS examined several issues for these tax years that resulted in various audit adjustments. The Company and the IRS Office of Appeals have settled various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs, foreign exchange losses, and a third-party financing transaction in previous years.
We have received notices of deficiency and a final partnership administrative adjustment with respect to fiscal years 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S. Tax Court.
The U.S. Tax Court cases generally involve three primary issues. The first issue pertains to a capital loss the Company claimed in fiscal year 2013 in the amount of $651 million, which the IRS subsequently disallowed, and for which it proposed a substantial understatement penalty. The total cash tax payment the IRS is seeking is approximately $503 million, inclusive of penalties and interest, which continues to accrue. The U.S. Tax Court held a trial on this matter in two sessions in August and October 2025. Post-trial briefing concluded in April 2026. A decision from the court is now pending.
The second issue pertains to the Company’s deduction for restructuring expenses in fiscal year 2013 in the amount of $139 million, which the IRS has disputed. The total cash tax payment the IRS is seeking is approximately $108 million, inclusive of penalties and interest, which continues to accrue. In January 2025, the Court denied the IRS’ motion for summary judgment. A trial date is pending.
The third issue primarily pertains to foreign currency losses from 2009 that the Company claimed in fiscal years 2010 and 2011 in the amount of $163 million, resulting from the depreciation of the U.S. dollar against the Euro over an eight-year period (from 2001 to 2009) upon termination of a partnership interest involving two entities with different functional currencies. The total cash tax payment the IRS is seeking is approximately $125 million, inclusive of penalties and interest, which continues to accrue. In March 2026, the Court granted the IRS’ motion for summary judgment. A final decision on the Company’s tax liability is pending. During the current year, the Company increased its accrual to fully reserve the net amount of its expected tax liability in this matter.
As we believe we will ultimately prevail on the technical merits of the first and second issues above and are continuing to challenge them in the U.S. Tax Court, the first and second issues are not fully reserved and would result in incremental federal and state tax expense of approximately $523 million (including estimated interest and penalties) for the unreserved portion of these items, if we do not prevail. The total cash tax exposure across all three issues above is approximately $655 million. These amounts are net of an expected $81 million interest deduction tax benefit.
During fiscal 2024, the Company determined there were inadvertent omissions on previously filed tax returns related to gain recognition agreements and certain related tax forms and disclosures. The Company notified the IRS promptly and filed for relief under Treas. Reg. Sec. 1.367(a)-8(p) to correct the issue.
The Company’s fiscal years 2009, 2010, and 2013 are in the U.S. Tax Court, and consequently these years will remain open until such proceedings have concluded. The Company has agreed to extend the statute of limitations for fiscal and tax return years 2014 through 2021 to December 31, 2027. The Company expects to reach resolution for fiscal and tax return years 2009 through 2011 no earlier than fiscal year 2027. The Company expects to reach resolution for fiscal and tax return years 2012 and 2013 no earlier than fiscal year 2028. The Company expects to reach resolution for fiscal and tax return years 2014 through 2021 no earlier than fiscal year 2027.
The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions. Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future.
Income Taxes Paid - Net of Refunds Received
Cash paid for income taxes, net of refunds received, by jurisdiction for the year ended March 31, 2026, was as follows:
| Fiscal Year Ended | ||||||||
| (in millions) | March 31, 2026 | |||||||
| Federal | $ | 18 | ||||||
| State | 27 | |||||||
| Foreign | ||||||||
| Australia | 27 | |||||||
| Germany | 13 | |||||||
| India | 53 | |||||||
| Italy | 17 | |||||||
| Switzerland | 13 | |||||||
| All other foreign | 74 | |||||||
| Income taxes paid, net of refunds | $ | 242 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 8, 2026 | Showing above |
| 2025 | May 15, 2025 | |
| 2024 | May 17, 2024 | |
| 2023 | May 19, 2023 | |
| 2022 | May 26, 2022 | |
| 2021 | May 28, 2021 | |
| 2020 | Jun 1, 2020 | |
| 2019 | Jun 13, 2019 | |
| 2018 | May 29, 2018 | |
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.