Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

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Income Taxes
 9 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense and effective tax rates were:
Three Months Ended September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(in thousands, except effective tax rate)
Income (loss) before income taxes $ 7,930  $ (25,576) $ (5,383) $ (69,446)
Income tax expense 649  1,466  2,954  3,490 
Effective tax rate 8.2  % 5.7  % 54.9  % 5.0  %

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. The Company has used a discrete-period effective tax rate, which reflects the actual tax attributable to year-to-date earnings and losses for the three and nine months ended September 30, 2021 and 2020. Due to operating losses, the Company has determined that it is unable to reliably estimate its annual effective tax rate. A small change in the Company’s estimated marginal pretax results for the year ending December 31, 2021 may result in a material change in the expected annual effective tax rate.

On July 22, 2020, the United Kingdom enacted a law that increased the corporate income tax rate from 17% to 19% beginning in April 2021. As a result of the tax rate change, the Company re-valued its deferred taxes in the United Kingdom and recognized tax expense of $0.7 million for the three and nine months ended September 30, 2020.

On June 10, 2021, the United Kingdom enacted a law that increased the corporate income tax rate from 19% to 25% beginning in April 2023. As of result of the tax rate change, the Company re-valued its deferred taxes in the United Kingdom and recognized tax expense of $1.5 million for the nine months ended September 30, 2021.
Income tax expense for the three months ended September 30, 2021 and 2020 was $0.6 million and $1.5 million, respectively. The rate for the three months ended September 30, 2021 differs from the Federal statutory rate of 21% primarily due to valuation allowances and state taxes. The rate for the three months ended September 30, 2020 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 nine months ended September 30, 2021 and 2020 was $3.0 million and $3.5 million, respectively. The rate for the nine months ended September 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. The rate for the nine months ended September 30, 2020 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.

In connection with the IPO, the Company executed an income tax receivable agreement (the “TRA”) with certain pre-IPO owners. See Note 19 — Subsequent Events included in these condensed consolidated financial statements for more information regarding the TRA.