Income Taxes

9 Months Ended

Sep. 30, 2023

Income Taxes

Income Taxes

9. Income Taxes

The Company’s effective tax rate on pre-tax income was 37.7% and 25.8% for the three months ended September 30, 2023, and 2022, respectively, and 30.5% and 28.5% for the nine months ended September 30, 2023, and 2022, respectively. The increase in the effective tax rate for the three and nine months ended September 30, 2023, was due to tax deduction limitations on executive compensation. The effective tax rate for the three months ended September 30, 2023, also increased due to the reduction of the federal valuation allowance recorded in the third quarter of 2022 as a result of increased deductibility of interest costs due to a tax election made by the Company in the third quarter of 2022.

For the nine months ended September 30, 2023, and 2022, the effective tax rate differs from the U.S. federal statutory income tax rate as follows:

	September 30,
	2023		2022
Tax at federal statutory rate	21.0	%	21.0	%
State taxes, net	5.3		5.5
Valuation allowance	(1.1)		—
Permanent items	2.0		1.3
Deductibility limitations on excess compensation	4.0		0.7
Other	(0.7)		—
Effective income tax rate	30.5	%	28.5	%