INCOME TAXES

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

8. INCOME TAXES

Provision for income taxes the three and nine months ended September 30, 2023 and 2022 consisted of the following (in thousands):

		Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022
Income before provision for income taxes	$	3,965		$	8,582		$	23,622		$	12,226
Provision for income taxes		(1,285	)		(877	)		(5,636	)		(1,264	)
Effective tax rate		32.4	%		10.2	%		23.9	%		10.3	%

Provision for income taxes for the three and nine months ended September 30, 2023 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate. Provision for income taxes for the three months ended September 30, 2022 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate. Provision for income taxes for the nine months ended September 30, 2022 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate. We maintain a partial valuation allowance against our U.S. federal deferred tax assets and maintain a full valuation allowance against our U.S. state and Canadian federal deferred tax assets. The change in the estimated effective tax rate was mainly driven by higher U.S. taxable income which was a result of higher U.S. passive income.

As of September 30, 2023, we had unrecognized tax benefits under Accounting Standards Certification (“ASC”) 740 Income Taxes of approximately $7.3 million and applicable interest of $0.1 million. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $3.5 million. Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

As of September 30, 2023, we had net deferred income tax assets of $7.0 million and deferred income tax liabilities of $0.1 million. Because we have net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state, and foreign taxing authorities may examine our tax returns for all years from 2005 through the current period.

We maintain a valuation allowance against certain of our deferred tax assets, including certain federal, all state, and certain foreign deferred tax assets because of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results. If we determine the deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.