INCOME TAXES

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company recorded an income tax benefit of $1.7 million for the three months ended March 31, 2022 compared to an income tax expense of $0.9 million for the three months ended March 31, 2021. The income tax benefit recorded for the three months ended March 31, 2022 is driven by a change in the valuation allowance in the U.S. and certain foreign jurisdictions, offset by the post-acquisition tax benefit from Afterpay entities that is not included in the Company’s estimated annual effective income tax rate. The difference between the income tax benefit for the three months ended March 31, 2022 and the income tax expense for the three months ended March 31, 2021 primarily relates to the post-acquisition tax benefit from Afterpay entities that are not included in the Company’s estimated annual effective income tax rate.

The tax provision for the three months ended March 31, 2022 and March 31, 2021 is calculated on a jurisdictional basis. The Company estimated the worldwide income tax provision using the estimated annual effective income tax rate expected to be applicable for the full year. The Company’s 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 tax rate, including factors such as the mix of forecasted pre-tax earnings in the various jurisdictions in which the Company operates, changes in valuation allowances against deferred tax assets, the recognition and de-recognition of tax benefits related to uncertain tax positions, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. Due to the difficulty in forecasting the fiscal year 2022 mix of income by jurisdiction for the Afterpay entities, the Company determined that the estimated annual effective rate method would not provide a reliable estimate and the Company applied the actual effective tax rate for the year to the Afterpay entities' year to date income as its best estimate.

As of March 31, 2022, the Company retains a full valuation allowance on its net deferred tax assets in the U.S. and certain foreign jurisdictions. The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods. The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income.