Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three months ended March 31, 2023 and 2022, the Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the period. There were no material changes to the Company's methodology for determining unrecognized tax benefits during the three months ended March 31, 2023.

For the three months ended March 31, 2023 and 2022, the Company recorded income tax expense (benefit) at an effective tax rate of 22.6% and 23.5%, respectively. The Company's effective tax rate was higher compared to the U.S. federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the IRA) which is effective for tax years beginning after December 31, 2022. The IRA establishes a 15% corporate alternative minimum tax for certain corporations which is not applicable to the Company for 2023 in accordance with the safe harbor provided in IRS Notice 2023-7. The IRA also includes a 1% excise tax on stock repurchases made by publicly traded U.S. corporations and includes new and renewed options for energy credits. These changes do not have a significant impact on the Company's financial statements and disclosures.

The Company intends to maintain a valuation allowance on certain of its state net operating loss deferred tax assets (DTAs) until there is sufficient evidence to support a reversal of all or a portion of such allowance. However, given the Company's anticipated future earnings, the Company believes that there is a reasonable possibility that, in the near term, sufficient positive evidence may become available that supports the release of a portion of the Company's valuation allowance, which would result in the recognition of certain DTAs and a decrease to income tax expense for the period in which the release is recorded. The exact timing and amount of the valuation allowance release would be subject to change based on the level of profitability that the Company can achieve.