Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

The difference between the Company's effective tax rate for the three and nine months ended September 30, 2022 and 2021 was primarily due to the HCS Sale in the three months ended September 30, 2021.

The Company recorded an aggregate deferred federal, state, and local tax benefit of $7.3 million for the three months ended September 30, 2022, which was partially offset by an increase to the valuation allowance of $6.7 million. The Company recorded an aggregate deferred federal, state, and local tax benefit of $52.8 million for the nine months ended September 30, 2022, which was partially offset by an increase to the valuation allowance of $50.7 million. The Company recorded an aggregate deferred federal, state, and local tax expense of $81.0 million for the three months ended September 30, 2021, which was partially offset by a reduction to the valuation allowance of $71.8 million. The Company recorded an aggregate deferred federal, state, and local tax expense of $35.0 million for the nine months ended September 30, 2021, which was partially offset by a reduction to the valuation allowance of $26.5 million. The deferred income tax expense for the nine months ended September 30, 2021 included $104.3 million as a result of the gain on the HCS Sale, partially offset by a benefit of $69.3 million as a result of operating losses (exclusive of the HCS Sale).

The Company evaluates its deferred tax assets each quarter to determine if a valuation allowance is required based on whether it is more likely than not that some portion of the deferred tax asset would not be realized. The Company's valuation allowance as of September 30, 2022 and December 31, 2021 was $418.7 million and $368.0 million, respectively.

The increase in the valuation allowance for the nine months ended September 30, 2022 is the result of current operating losses during the nine months ended September 30, 2022 and by the anticipated reversal of future tax liabilities offset by future tax deductions. The decrease in the valuation allowance for the nine months ended September 30, 2021 is primarily the result of a $95.2 million reduction recorded as a result of the HCS Sale, partially offset by an increase in the valuation allowance of $68.6 million established against current operating losses during the nine months ended September 30, 2021.

The Company recorded interest charges related to its tax contingency reserve for cash tax positions for the three and nine months ended September 30, 2022 and 2021 which are included in income tax expense or benefit for the period. As of September 30, 2022, tax returns for years 2018 through 2020 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination.