Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

We account for income taxes under FASB Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). We calculate the quarterly tax provision consistent with the guidance provided by ASC 740, whereby we forecast the estimated annual effective tax rate and then apply that rate to the year-to-date pre-tax book (loss) income. The effective tax rate may be subject to fluctuations during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective rate, including factors such as the valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax positions, or changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. There is no tax benefit recognized on certain of the net operating losses incurred due to insufficient evidence supporting the Company’s ability to use these losses in the future. The effective tax rates were as follows:

	Three Months Ended March 31,
(In thousands, except effective tax rate)	2022		2021
Income from continuing operations before income taxes	$	4,050	$	5,406
Income tax benefit (provision)	$	14,421	$	(1,106	)
Effective tax rate	NM			20.5	%

NM - We define “NM” as not meaningful for percentages greater than 200%.

Our provision for income taxes differs from the tax computed at the U.S. federal statutory income tax rate primarily due to permanent differences, income attributable to foreign jurisdictions taxed at different rates, state taxes, tax credits and certain discrete items including a windfall benefit of $5.1 million for the three months ended March 31, 2022 and a windfall benefit of $1.0 million for the three months ended March 31, 2021. Our effective tax rates for the three months ended March 31, 2022, compared with the prior year comparable period, differ primarily due to the release of valuation allowance of $11.2 million in the three months ended March 31, 2022. In addition, the permanent items, credits and the impact of foreign earnings had more impact on the pre-tax income of $4.1 million in the three months ended March 31, 2022, compared to the impact of these items on a pre-tax income of $5.4 million for the three months ended March 31, 2021.

In evaluating our ability to recover our deferred tax assets within the jurisdictions from which they arise, we consider all available evidence, including scheduled reversals of deferred tax liabilities, tax-planning strategies, and results of recent operations. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss). During the three months ended March 31, 2022, we released valuation allowances of $11.2 million related to U.S. deferred tax assets.

Our unrecognized income tax benefits were $30.5 million and $30.3 million as of March 31, 2022 and December 31, 2021, respectively. If any portion of our unrecognized tax benefits is recognized, it could impact our effective tax rate. The tax reserves are reviewed periodically and adjusted considering changing facts and circumstances, such as progress of tax audits, lapse of applicable statutes of limitations and changes in tax law.

Our Harris Purchase Agreement to sell substantially all of the assets of the Hospitals and Large Physician Practices Business includes the majority of our foreign subsidiaries. The assets and liabilities of these foreign subsidiaries have been classified as held for sale on our consolidated balance sheet. As such, the company no longer considers the undistributed earnings of these foreign subsidiaries to be indefinitely invested. Therefore, in the three months ended March 31, 2022, we have recorded a deferred tax asset of $7.0 million. The tax benefit of recording this deferred tax asset has been included in discontinued operations.