INCOME TAXES

On March 27, 2020, the U.S. government enacted the CARES Act to provide relief from the coronavirus pandemic. The CARES Act includes a provision that allows companies to carryback net operating losses (NOL’s) generated in the period 2018 through 2020 to prior years. In conjunction with the disposition of the Core business in 2018, we generated a significant amount of taxable income in 2018. Subsequent to this, we generated net losses in 2019 and through the first quarter of 2020. For the net losses generated in 2019, we previously recorded a valuation allowance to the full value of the deferred tax asset associated with our NOL carryforwards due to realization of the deferred tax assets being improbable. The CARES Act makes these assets realizable, and as of the date of the CARES Act, we have recognized an income tax benefit of approximately $3.7 million associated with the release of the valuation allowance on our Federal NOL carryforward related to 2019. We also recognized an income tax benefit of approximately $1.2 million related to our net loss before income taxes for the three months ended March 31, 2020. There are approximately an additional $4.4 million of 2018 Federal income tax payments available to offset against any other 2020 losses that may be incurred.

The Company’s income tax expense (benefit) was approximately $(4,905,000) and $6,000 with an effective tax rate of 71.5% and (0.1)% for the three months ended March 31, 2020 and 2019, respectively. The effective rate differs from the statutory rate primarily due to the release of the valuation allowance on our net operating loss carryforward from 2019.

The following is a roll-forward of the Company's total gross unrecognized tax benefits, not including interest and penalties, for the period ended March 31, 2020.



(in thousands)	Gross Unrealized Tax Benefits
Balance at January 1, 2020	$	1,313
Additions of tax positions related to the current year	—
Additions of tax positions related to the prior year	—
Decreases for tax positions related to the prior year	—
Balance at March 31, 2020	$	1,313

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s condensed consolidated financial statements. As of March 31, 2020, the Company had approximately $217,000 in accrued interest and penalties related to unrecognized tax benefits. Included in the income tax expense for the three months ended March 31, 2020 is approximately $39,000 of interest and penalties on the Company's uncertain tax positions. If the Company were to prevail on all uncertain tax positions, the resulting impact will be material as the Company will recognize approximately $1,530,000 of tax benefits in the provision of income taxes. It is expected that all of the uncertain tax positions should be resolved by October 2022.