INCOME TAXES

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law. The IRA includes a 15% corporate alternative minimum tax for companies that report over $1 billion in U.S. profits to shareholders and a 1% excise tax on stock buy backs. The Company does not expect the IRA to have a material tax impact.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was passed into law, amending portions of relevant U.S. tax laws. The CARES Act contains changes to corporate taxation, including among other things, adjusting net operating loss (NOL) limitations and carryback rules, refundable AMT credits, bonus depreciation and interest expense limitations. The CARES Act also provides for an Employee Retention Credit, a fully refundable payroll tax credit for certain eligible employers and the ability for all eligible employers to defer payment of the employer share of payroll taxes owed on wages paid for the period ending December 31, 2020 (such deferred payroll taxes are due in two installments: 50% by December 31, 2021 and 50% by December 31, 2022). The Company elected to defer payroll tax payments which totaled $1.6 million as of September 30, 2022. The Company paid $1.6 million in December 2021 as required under the CARES Act. The remaining amount of $1.6 million is required to be paid in December 2022.

For the three months ended September 30, 2022 and 2021, the Company’s effective tax rate was 12.1% and 47.2%, respectively. For the nine months ended September 30, 2022 and 2021, the Company’s effective tax rate was 65.1% and 45.0%, respectively. The Company’s income tax expense was primarily attributable to earnings in the United States and foreign jurisdictions subject to income taxes and foreign withholding taxes. The Company did not have any material changes to its conclusions regarding valuation allowances for deferred income tax assets or uncertain tax positions for the three and nine months ended September 30, 2022 and 2021.

Given the near-break even results projected results for fiscal year 2022, the Company determined that any changes in pretax income would result in a significant impact on the estimated annual effective tax rate. As a result, the Company utilized the year-to-date effective tax rate as the estimated annual effective tax rate when determining the income taxes recorded during the three and nine months ended September 30, 2022,

For additional information about income taxes, please refer to Note 9 to the Company’s Consolidated Financial Statements for the year ended December 31, 2021, included in Part II, Item 8 of the 2021 Form 10-K.