INCOME TAXES

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company's effective income tax rate was 24.9% and 3.0% for the nine months ended September 30, 2021 and 2020, respectively.

The effective income tax rate for the nine months ended September 30, 2021, was lower compared to the blended federal and state/provincial statutory rate of approximately 26%, primarily as a result of proportionally more net income in lower-tax rate jurisdictions, driven by the $146.9 million gain on the Katapult merger in the second quarter of 2021 and the $40.2 million loss on extinguishment of debt in the third quarter of 2021. Additionally, the effective tax rate also includes (i) the release of a valuation allowance of $0.4 million due to the Company's share of Katapult's income, (ii) tax benefits related to share-based compensation of $0.2 million, (iii) $1.3 million of tax expense related to the non-deductible transaction costs and the change in fair value of contingent consideration, (iv) $0.3 million tax expense of additional Texas accrual for 2020 due to the settlement of 2013 to 2019 Texas returns and (v) a tax benefit of $0.9 million for the recognition of the research and development tax credit.

The lower effective income tax rate for the nine months ended September 30, 2020 was primarily due to a tax benefit from the CARES Act. The CARES Act, among other things, allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid Federal income taxes. The Company recorded an income tax

benefit of $9.1 million related to the carry-back of NOLs from tax years 2018 and 2019, which offset its tax liability for prior years and generated a refund of previously paid taxes at a 35% statutory rate. In addition, the Company released a valuation allowance of $0.6 million against the losses from its investment in Katapult and, in the second quarter of 2020, the Company recorded a tax benefit of $4.6 million from the release of a valuation allowance previously recorded against NOLs for certain entities in Canada. These benefits were partially offset by uncertain tax position reserve adjustments in the U.S. of $1.1 million.The Company intends to reinvest Canada earnings indefinitely in its Canadian operations and therefore has not provided for any non-U.S. withholding tax that would be assessed on dividend distributions. If the accumulated earnings in Canada of $222.7 million were distributed to the U.S. legal entities, the Company would be subject to Canadian withholding taxes of an estimated $11.1 million. In the event the earnings are distributed to the U.S. legal entities, the Company will adjust the income tax provision for the applicable period and determine the amount of foreign tax credit that would be available.