INCOME TAXES

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

We recorded income tax expense of $0.8 million and $16.8 million for the three months ended March 31, 2020 and 2019 respectively. Our effective tax rate for the three months ended March 31, 2020 was (2.7)%, compared to 24.7% for the same period in 2019. The effective tax rate for the first quarter of 2020 was negative as the company incurred tax expense on a loss before income taxes. The current quarter tax expense was driven primarily from expenses related to the acquisition of WLH which are currently not deductible for tax purposes.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted into law.  The legislation contains a number of economic relief provisions in response to the COVID-19 pandemic, including the ability to carryback tax losses 5 years for losses generated in tax years 2018, 2019 and 2020.  As of March 31, 2020, we have not recorded a tax benefit related to the CARES Act but we are continuing to evaluate the impact of this legislation on the Company.

At both March 31, 2020 and December 31, 2019, cumulative gross unrecognized tax benefits were $6.2 million. If the unrecognized tax benefits as of March 31, 2020 were to be recognized, approximately $4.9 million would affect the effective tax rate. We had $0.6 million of gross interest and penalties related to unrecognized tax positions accrued as of March 31, 2020 and December 31, 2019.

As of March 31, 2020 and December 31, 2019, the net deferred tax assets included in the consolidated balance sheet were $268.7 million and $140.5 million, respectively. The increase in deferred tax assets is primarily due to the addition of the estimated fair value of deferred tax assets recorded from the acquisition of WLH.