Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 14 — INCOME TAXES

The Company recognized income tax benefit of $7.3 million and expense of $0.3 million for the three months ended September 30, 2023 and 2022 respectively, and $6.9 million benefit and $0.8 million expense for the nine months ended September 30, 2023 and 2022, respectively.

The income tax benefit was primarily attributable to the release of the valuation allowance of certain U.S. federal and state deferred tax assets. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our U.S. federal and state deferred tax assets will be realizable. When a change in valuation allowance is recognized during an interim period, the change in valuation allowance resulting from current year income is included in the annual effective tax rate and the release of valuation allowance supported by projections of future taxable income is recorded as a discrete tax benefit in the interim period. We released $7.4 million valuation allowance as a discrete tax benefit which is part of the effective tax rate during the nine months ended September 30, 2023 disclosed below. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.

The effective tax rate for the nine months ended September 30, 2023 and 2022 was (176.9)% and 7.4%, respectively. The effective income tax rate in 2023 was primarily related to income tax benefit from the release of the valuation allowance. The effective income tax rate in 2022 was primarily related to expense associated with tax filing jurisdictions with no associated valuation allowance.