Income Taxes - Continuing Operations

3 Months Ended

Mar. 31, 2020

Income Taxes - Continuing Operations

12. Income Taxes – Continuing Operations

During the three months ended March 31, 2020, the Company recognized an income tax benefit of $943 on a pre-tax income of $1,500, compared to an income tax expense of $403 on a pre-tax loss of $2,694 for the prior year period.

For the three months ended March 31, 2020 and 2019, the effective tax rate differs from the U.S. federal statutory income tax rate as follows:


	March 31,
	2020		2019
Tax at federal statutory rate	21.0	%	21.0	%
State Taxes, net	33.9		(0.8)
Valuation allowance	70.4		(31.2)
Permanent Items	34.6		(2.1)
Tax benefit CARES Act	(238.6)		—
Other	15.8		(1.9)
Effective income tax rate	(62.9)	%	(15.0)	%

In March 2020, the CARES Act was signed into law. The CARES Act allows companies with net operating losses (NOLs) originating in 2018, 2019, or 2020 to carry back those losses for five years and temporarily eliminates the tax law provision that limits the use of NOLs to 80% of taxable income. The CARES Act increases the Internal Revenue Code Section 163(j) interest deduction limit for 2019 and 2020, and allows for the acceleration of refunds of alternative minimum tax credits. For the quarter ended March 31, 2020, the Company estimated a tax benefit for certain provisions in the CARES Act including the carryback of losses and the increase to the interest deduction limitation, resulting in a tax rate benefit of 238.6%. In addition, the Company recorded a partial valuation allowance with a tax rate impact of 70.4%, due to the limitation on the deductibility of interest expense. The Company’s income tax receivable on the condensed consolidated balance sheet as of March 31, 2020, relates primarily to U.S. federal income tax receivables relating to prior tax years including NOL carrybacks. In the prior year quarter ended March 31, 2019, the effective tax rate differs from the federal U.S. statutory rate primarily due to the impact of tax expense recorded related to the partial valuation allowance due to the limitation on the deductibility of interest expense.