Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company follows guidance under ASC Topic 740-270 Income Taxes, which requires that an estimated annual effective tax rate is applied to year-to-date ordinary income (loss). At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The tax effect of discrete items is recorded in the quarter in which the discrete events occur.

The Company recorded income tax expense (benefit) of $11.1 million and $(5.4) million for the three months ended September 30, 2022 and 2021, respectively, and income tax expense (benefit) of $(18.1) million and $5.5 million for the nine months ended September 30, 2022 and 2021, respectively. The tax expense in the three months ended September 30, 2022 includes tax expense of $8.7 million on the legal settlement income which was recorded discretely in the quarter. The tax, excluding the legal settlement, was favorably impacted by non-taxable contingent income, and mix of income by jurisdiction. The tax benefit in the three months ended September 30, 2021 was unfavorably impacted by non-deductible amounts for equity-based compensation and follow-on offering costs.

The tax benefit in the nine months ended September 30, 2022 includes tax expense of $8.7 million on the legal settlement which was recorded discretely in the quarter. The tax on the loss, excluding the legal settlement, was favorably impacted by mix of earnings by jurisdictions offset by non-deductible amounts for officers’ compensation and transaction costs. The tax benefit in the nine months ended September 30, 2021 was unfavorably impacted by non-deductible equity based compensation as well as initial public offering and secondary offering costs.

For the three and nine months ended September 30, 2022 and 2021, no reserves for uncertain tax positions have been recorded. The Company will continue to monitor this position each interim period.

In August 2022, the U.S. Inflation Reduction Act (“IRA”) was enacted into law. The IRA contains a number of revisions to the Internal Revenue Code that generally take effect in tax years beginning after December 31, 2022. The Company is in the process of evaluating provisions included under the IRA and its impact to the Company’s consolidated financial statements.