INCOME TAXES

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

As of June 30, 2024, the Company has concluded that it is not more likely than not that it will realize the net deferred tax asset recorded as of June 30, 2024. As a result, the Company has recorded a full valuation allowance against the net deferred tax asset recorded as of June 30, 2024. The valuation allowance is determined in accordance with the provisions of ASC 740, Income Taxes, which require an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The Company primarily relied on its reversing taxable temporary differences to assess its valuation allowance, which resulted in recording a full valuation allowance against its net deferred tax assets during the quarter. If it is determined that a portion or all of the valuation allowance is not required, it will generally be a benefit to the income tax provision in the period such determination is made.

For the three and six months ended June 30, 2024, the Company recorded an income tax expense of $0.1 million and $0.3 million, respectively, which represents an effective tax rate of (4.2)% and (3.6)%, respectively. The difference between the income tax expense and the tax at the federal statutory rate of 21.0% on current year operations is principally due to the impact of the valuation allowance and state income taxes.

For the three and six months ended June 30, 2023, the Company recorded an income tax expense of $3.9 million and $1.8 million, respectively, which represents an effective tax rate of 31.3% and 26.0%, respectively. The difference between the income tax expense in each period and the tax at the federal statutory rate of 21.0% on current year operations is principally due to state taxes, disallowed officer’s compensation, and capital expenses, offset by a partial reversal of previously recorded valuation allowance in those periods.