INCOME TAXES

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.

The effective tax rate for the three months ended March 31, 2023 was 0% which was lower than the statutory rate of 21% because the Company has recognized a full valuation allowance on its deferred tax assets. The Company continued to evaluate the realizability of deferred tax assets and due to continued reduced profitability concluded that a valuation allowance should continue to be recognized for any deferred tax assets generated during the quarter. As a result, there was no net income tax benefit recorded for pretax losses of the U.S. operations in the three months ended March 31, 2023.

The effective tax rate for the three months ended March 31, 2022 was 17.9% which was lower than the statutory rate of 21% primarily due to state income taxes and tax benefits associated with stock-based compensation.