Income Tax Expense

9 Months Ended

Sep. 30, 2020

The following table provides information regarding the Company’s income tax expense for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands):


	Three Months ended September 30,						Nine Months ended September 30,
	2020			2019			2020			2019
	(unaudited)						(unaudited)
Income tax expense	$	12,714		$	10,730		$	32,773		$	26,648
Effective tax rate	24.1		%	27.1		%	25.4		%	25.0		%

Income tax expense for the three and nine months ended September 30, 2020, as compared to same period in the prior year, increased due to higher income before taxes, increased number of states in which the Company owes taxes and an increase in non-deductible expenses consequent to the USWM Acquisition.

Accordingly, the effective income tax rate for the nine months ended September 30, 2020 also increased, as compared to the same period in prior year. The effective income tax rate for the three months ended September 30, 2020 decreased due to greater research and development tax credits recognized in the quarter.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax incentives to strengthen the U.S. economy and to fund a nationwide effort to curtail the effect of the COVID-19 pandemic. While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions which are expected to impact the Company’s financial statements include removal of certain limitations on utilization of net operating losses, increasing the ability to deduct interest expense, and amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

As of September 30, 2020, the Company expects that these provisions will not have a material impact, as the Company does not have net operating losses that would fall under the provisions of this legislation, nor does it expect interest expense to be limited. The ultimate impact of the CARES Act may differ from this estimate due to changes in interpretations and assumptions, additional guidance that may be issued, and actions the Company may take in response to the CARES Act. The CARES Act is highly technical and complex. The Company will continue to assess the impact that various provisions may have on its business.

- 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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