Income Taxes

6 Months Ended

Jun. 30, 2020

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Income tax expense (benefit) represented (19)% and 19% of pre-tax book income (loss) for the three months ended June 30, 2020 and 2019, respectively, and (17)% and 18% of pre-tax book income (loss) for the six months ended June 30, 2020 and 2019, respectively. The effective income tax (benefit) rates for the three and six months ended June 30, 2020 were significantly impacted by the effects of the $52.3 million asset impairment loss of the U.S. transportation filtration asset (see Note 10, "Asset Restructuring and Impairment Costs"). As of June 30, 2020, the Company evaluated its ability to utilize its deferred tax assets, including research and development and other tax credits and net operating losses ("NOLs"), before they expire. As a result of the impacts of COVID-19 and other factors, a $4.0 million tax expense was recorded to increase the valuation allowance against certain state tax credits and NOLs. In determining the need for a valuation allowance, the Company considered many factors, including specific taxing jurisdictions, sources of taxable income and income tax strategies. A valuation allowance is recognized if, based on the weight of available evidence, the Company concludes that it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

The following table presents the principal reasons for the difference between the Company's effective income tax (benefit) rate and the U.S. federal statutory income tax (benefit) rate:



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
U.S. federal statutory income tax (benefit) rate	(21	)%	21	%	(21	)%	21	%
U.S. state income taxes (benefit), net of federal income tax effect	(4	)%	2	%	(5	)%	1	%
Foreign tax rate differences and financing structure	—	%	—	%	—	%	1	%
U.S. taxes on foreign earnings	—	%	—	%	1	%	1	%
Research and development and other tax credits	2	%	(7	)%	(3	)%	(6	)%
Excess tax benefits from stock compensation	—	%	—	%	—	%	—	%
Uncertain income tax positions	—	%	1	%	1	%	(1	)%
Valuation allowances	6	%	—	%	10	%	—	%
Other differences - net	(2	)%	2	%	—	%	1	%
Effective income tax (benefit) rate	(19	)%	19	%	(17	)%	18	%

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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