Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes

Income Taxes

11. Income Taxes

The Company’s effective tax rate was (0.7)% and 11.5% for the three month periods ended March 31, 2023 and 2022, respectively. The difference in the effective tax rate and the U.S. federal statutory rate was primarily due to the full valuation allowance the Company maintains against its deferred tax assets and state minimum taxes in the United States. The effective tax rate is calculated by dividing the Provision (benefit) for income taxes by the Loss before provision (benefit) for income taxes.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. The Company increased its valuation allowance approximately $238,000 during the three month period ended March 31, 2023. In the future, changes in the Company’s valuation allowance may result from, among other things, additional pretax operating losses resulting in increases in its valuation allowance or pretax operating income resulting in decreases in its valuation allowance