Electronic Arts 2016 Annual Report Download - page 157

Annual Report
Provision for (benefit from) income taxes for the fiscal years ended March 31, 2016, 2015 and 2014 consisted of
(in millions):
Current Deferred Total
Year Ended March 31, 2016
Federal ............................................................ $ 69 $(376) $(307)
State .............................................................. 5 (14) (9)
Foreign ............................................................ 36 1 37
$110 $(389) $(279)
Year Ended March 31, 2015
Federal ............................................................ $ 10 $ 17 $ 27
State .............................................................. — — —
Foreign ............................................................ 21 2 23
$ 31 $ 19 $ 50
Year Ended March 31, 2014
Federal ............................................................ $ (2) $ (9) $ (11)
State .............................................................. 1 (2) (1)
Foreign ............................................................ 8 3 11
$ 7 $ (8) $ (1)
On July 27, 2015, the United States Tax Court, in an opinion in Altera Corp v. Commissioner, invalidated the
portion of the Treasury regulations issued under Internal Revenue Code Section 482 requiring related-party
participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued
the final decision on December 28, 2015. On February 19, 2016, the government filed a notice of appeal of the
Tax Court decision. At this time, the U.S. Treasury has not withdrawn its regulations that require including stock-
based compensation in a cost sharing arrangement. We have evaluated the opinion and have recorded a $41
million tax benefit related to fiscal year 2016 stock-based compensation deductions that will not be subject to
reimbursement through cost share payments if the Tax Court’s opinion is sustained. We will continue to monitor
developments related to the case and the potential impact on our consolidated financial statements.
Excess tax benefits from stock-based compensation deductions are allocated to contributed capital before
historical net operating losses are utilized to reduce tax expense. The income tax provision includes tax benefits
allocated directly to contributed capital of $83 million, $21 million and $12 million for fiscal years 2016, 2015,
and 2014, respectively.
The differences between the statutory tax expense rate and our effective tax expense (benefit) rate, expressed as a
percentage of income before provision for (benefit from) income taxes, for the fiscal years ended March 31,
2016, 2015 and 2014 were as follows:
Year Ended March 31,
2016 2015 2014
Statutory federal tax expense rate ........................................ 35.0% 35.0% 35.0%
State taxes, net of federal benefit ......................................... 0.5% 0.1% (242.9)%
Differences between statutory rate and foreign effective tax rate ................ (22.1)% (22.3)% (142.9)%
Valuation allowance ................................................... (51.7)% (9.2)% 936.5%
Research and development credits ........................................ (0.6)% (1.1)% (128.6)%
Unremitted earnings of foreign subsidiaries ................................ 4.9% — —%
Resolution of tax matters with authorities .................................. —% (0.5)% (657.1)%
Non-deductible stock-based compensation ................................. 3.1% 3.5% 385.7%
Acquisition-related contingent consideration ............................... —% (0.2)% (185.7)%
Other ............................................................... (0.9)% 0.1% (14.3)%
Effective tax expense (benefit) rate ..................................... (31.8)% 5.4% (14.3)%
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