Income Taxes

6 Months Ended

Jun. 30, 2023

Income Taxes

Income Taxes

Note 13.  Income Taxes

Income tax expense was $3.0 million for the three months ended June 30, 2023, compared to $4.0 million for the three months ended June 30, 2022. The $1.0 million decrease was primarily due to a higher stock compensation deduction driven by an increase in stock price offset partially by an increase in pre-tax financial reporting income. Income tax expense was $8.2 million for the six months ended June 30, 2023, compared to $8.3 million for the six months ended June 30, 2022.

The effective tax rate for the three and six months ended June 30, 2023 was less than the U.S. statutory rate of 21% due to a forecasted Foreign Derived Intangible Income deduction, Federal research and development tax credits and a favorable discrete item related to equity compensation that reduces the annual tax rate.

The deferred income taxes of $38.9 million and $31.7 million as of June 30, 2023 and December 31, 2022, respectively, reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. As of June 30, 2023, we have recorded a $10.6 million valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization. Realization of our net deferred tax assets is dependent on future taxable income. We believe it is more likely than not that such assets will be realized; however, ultimate realization could be impacted by market conditions and other variables not known or anticipated at this time.