Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three months ended September 30, 2024 and 2023, the Company recorded an income tax benefit of $29,745 and $121, respectively, on pre-tax income of $6,153 and $326, respectively, for an effective income tax rate of (483.4%) and (37.1%), respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded an income tax benefit of $29,110 and $99, respectively, on pre-tax income of $14,010 and $1,670, respectively, for an effective income tax rate of (207.8%) and (5.9%), respectively.

The Company’s effective income tax rate for the three and nine months ended September 30, 2024 differed from the federal statutory rate of 21% primarily due to the change in valuation allowance previously recorded against certain U.S. federal and state deferred tax assets. When a change in a valuation allowance is recognized in an interim period, the change in valuation allowance resulting from current year income is included in the annual effective tax rate, and the release of valuation allowance supported by projections of future taxable income is recorded as a discrete tax benefit in the interim period. Accordingly, during the quarter ended September 30, 2024, the Company recognized an income tax benefit of $30,045 comprised of both a discrete tax benefit and change in the Company’s estimated annual effective tax rate arising from the change in valuation allowance. The Company continued to maintain a valuation allowance against deferred tax assets related to operating loss carryforwards in certain U.S. state and foreign jurisdictions.

The Company regularly assesses the need for a valuation allowance against its deferred tax assets. A valuation allowance is required to be established or maintained, when based on currently available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company has considered all evidence, both positive and negative, in assessing the need for a valuation allowance in each jurisdiction.

The positive evidence considered in evaluating U.S. federal and state deferred tax assets included the Company’s cumulative financial income position over the previous three years, as well as the composition and reversal patterns of existing taxable and deductible temporary differences between financial reporting and tax. Based on its evaluation, the Company believed it was appropriate to rely on forecasted future taxable income to support its U.S. federal and state deferred tax assets. The amount of deferred tax assets considered realizable; however, could be adjusted if negative evidence outweighs additional subjective evidence such as the Company’s projections for growth.