Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.22.2
Income Taxes
 6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense and effective tax rates were as follows:
Three Months Ended June 30, Six Months Ended
June 30,
2022 2021 2022 2021
(in thousands, except effective tax rate)
Income (loss) before income taxes $ 24,876  $ (1,906) $ 37,258  $ (13,313)
Income tax expense 430  1,733  1,248  2,305 
Effective tax rate 1.7  % 90.9  % 3.3  % 17.3  %

In general, with certain exceptions, ASC 740-270, Income Taxes, requires the use of an estimated annual effective tax rate to compute the tax provision during an interim period. For the three and six months ended June 30, 2022, the Company has net income before income taxes and used an estimated annual effective tax rate to compute the income tax provision. However, due to operating losses for the three and six months ended June 30, 2021, the Company determined that it was unable to reliably estimate its annual effective tax rate. As such, for the three and six months ended June 30, 2021, the Company used a discrete method, which reflected the actual tax attributable to year-to-date earnings and losses for the period.

Income tax expense for the three months ended June 30, 2022 and 2021 was $0.4 million and $1.7 million, respectively. The effective tax rate for the three months ended June 30, 2022 was 1.7% compared to 90.9% for the
three months ended June 30, 2021. The effective tax rate for the three months ended June 30, 2022 differs from the Federal statutory rate of 21% primarily due to valuation allowances, state taxes, and U.S. tax on foreign operations. The effective tax rate for the three months ended June 30, 2021 differs from the Federal statutory rate of 21% primarily due to the revaluation of deferred taxes in the United Kingdom, valuation allowances and state taxes.

Income tax expense for the six months ended June 30, 2022 and 2021 was $1.2 million and $2.3 million, respectively. The effective tax rate for the six months ended June 30, 2022 was 3.3% compared to 17.3% for the six months ended June 30, 2021. The effective tax rate for the six months ended June 30, 2022 differs from the Federal statutory rate of 21% primarily due to valuation allowances, state taxes, and U.S. tax on foreign operations. The effective tax rate for the six months ended June 30, 2021 differs from the Federal statutory rate of 21% primarily due to the revaluation of deferred taxes in the United Kingdom, valuation allowances and state taxes.

Realization of the Company’s deferred tax assets is dependent upon future earnings, if any. The timing and amount of future earnings are uncertain. Because of the Company’s lack of U.S. earnings history, the Company’s net U.S. deferred tax assets have been fully offset by a valuation allowance, excluding a portion of its deferred tax liabilities for tax deductible goodwill. As of June 30, 2022, the Company intends to continue maintaining a valuation allowance on its deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of the valuation allowance. A reduction in the valuation allowance would result in a material decrease to income tax expense in the period the release is recorded. Although the exact timing and reversal amount are unknown at this time, the Company may conclude that a significant portion of the valuation allowance be released contingent upon the earnings level it achieves in 2022 as well as its projected income levels in future periods.