Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes for the three months ended March 31, 2020 and 2019 was an expense of $21.8 million and $0.3 million, respectively. The effective income tax rate was 22.5% and 1.2% for the three months ended March 31, 2020 and 2019, respectively. The quarter-over-quarter increase in the effective income tax rate was primarily due to the relative impact of tax benefits from stock-based compensation. These benefits, approximately $5.9 million and $7.2 million for the first three months of 2020 and 2019 respectively, had less of an impact in reducing the effective tax rate for the period in 2020 on pretax income of $96.9 million as compared to the same period in 2019 on pretax income of $21.1 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law in the United States. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic. It includes provisions for the deferral of certain taxes and the acceleration of income tax deductions for certain expenses. The Company continues to monitor and record any effects that may result from the CARES Act as well as ongoing government guidance related to COVID-19 that may be issued.

In April 2020, the Company completed an intercompany sale of certain intellectual property that it expects will have a material favorable tax impact on the Company’s second quarter 2020 financial results. The Company's intellectual property footprint continues to evolve and this may result in tax rate volatility in the future.

The Company had gross unrecognized tax benefits of $103.7 million at March 31, 2020 and $102.8 million at December 31, 2019. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $9.9 million within the next twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation.