INCOME TAXES

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

10. INCOME TAXES

Current income tax expense represents the amount expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

The income tax expense and effective income tax rate for the three months ended March 31, 2023 and 2022 were as follows:

	Three Months Ended March 31,
	2023			2022
	(in thousands, except percentages)
Income tax expense	$	104		$	42,406
Effective income tax rate	(0.9)		%	(10.0)		%

For the three months ended March 31, 2023, the Company recorded $0.1 million of income tax expense. The Company's estimated annual effective income tax rate is (0.9)%, compared to the U.S. federal statutory rate of 21.0% due to a change in the valuation allowance 43.8%, state taxes (7.1)%, non-deductible transaction costs (58.8)% and other items 0.2%. The Company has a full valuation allowance on its net deferred tax asset as the evidence indicates that it is not more likely than not expected to realize such asset.

For the three months ended March 31, 2022, discrete tax expense of $7.3 million was included in the $42.4 million of income tax expense. The Company’s estimated annual effective income tax rate without discrete items was (8.3)%, compared to the U.S. federal statutory rate of 21.0% due to the fair value adjustment on debt instruments (15.8)%, change in valuation allowance (9.9)%, non-deductible interest (2.2)%, non-deductible employee costs (1.5)% and other items 0.1%.