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INCOME TAXES
 9 Months Ended
Sep. 30, 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 and nine months ended September 30, 2023 and 2022 were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(in thousands, except percentages)
Income tax expense$114 $10,642 $347 $4,398 
Effective income tax rate
(0.3)%(2.5)%(0.7)%(0.3)%
For the nine months ended September 30, 2023, the Company recorded $0.3 million of income tax expense which consisted of discrete state taxes. The Company's estimated annual effective income tax rate without consideration of discrete items is 0.0%, compared to the U.S. federal statutory rate of 21.0% due to projected changes in the valuation allowance 2.3%, state taxes (0.4)%, non-deductible transaction costs (22.8)% and other items (0.1)%. 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 nine months ended September 30, 2022, the Company recorded $4.4 million of income tax expense, which included a discrete tax expense of $9.1 million related to stock-based compensation and an increase in the valuation allowance on a capital loss. The Company’s estimated annual effective income tax rate was (0.3)%, compared to the U.S. federal statutory rate of 21.0% due to a goodwill impairment (12.2)%, change in valuation allowance (6.7)%, state taxes 0.8%, non-deductible interest (0.6)%, and other items (2.5)%.