Note 11 - Income Taxes

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11. Income Taxes

For the three-month and six-month periods ended June 30, 2020 and 2019, our income tax expense and effective income tax rates were as follows (dollars in millions):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Income tax expense	$	6		$	18		$	24		$	21
Effective income tax rate		35	%		29	%		27	%		45	%

We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each quarter is based upon these full year projections, which are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits to adjust our statutory Federal income tax rate of 21% to our effective income tax rate. For the six-months ended June 30, 2020, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 27% as follows: state income taxes added 5% and permanent differences between our U.S. GAAP income and taxable income resulted in an increase of 1%. For the six-months ended June 30, 2019, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 45% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income resulted in an increase of 3%, restricted stock vesting resulted in a decrease of 1% and divestiture of component 2 goodwill resulted in an increase of 17%.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. We are currently evaluating the impact of these provisions of the CARES Act but do not believe it will have a material effect on our estimated effective tax rate.