Income Taxes

3 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following:

	Three Months Ended
	March 31, 2025		March 31, 2024
	(in thousands)
Current	$	(2,785)	$	8,532
Deferred	5,976		(740)
Income tax provision	$	3,191	$	7,792

The provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate before the provision for income taxes.

The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:

	Three Months Ended
	March 31, 2025		March 31, 2024
Federal statutory rate	21.0	%	21.0	%
State income taxes, net of Federal benefit	5.1		5.3
Excess tax benefits related to share-based compensation (Note 14)	(22.1)		(9.4)
Return to provision	—		(0.2)
Non-deductible executive compensation	7.1		1.0
Research and development credits	(2.4)		(1.4)
Other	1.1		0.3
Effective tax rate	9.8	%	16.6	%

The Company recorded an excess tax benefit of $7.2 million for the three months ended March 31, 2025, as compared to $4.4 million during the same period in 2024, respectively. The excess tax benefit is related to the timing of stock option exercises as a result of our high stock price during the three months ended March 31, 2025 and 2024.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 162(m), the tax deduction for covered executives of public companies is limited to $1.0 million per individual. Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of $2.3 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively.

We also earn research and development tax credits as defined under Section 41 of the Internal Revenue Code. To qualify for the research and development tax credits, we perform annual studies that identify, document, and support eligible expenses related to qualified research and development activities. Eligible expenses include but are not limited to supplies, materials, contractor expenses and internal employee wages.

In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021, are required to be capitalized and amortized over five years. The amortization requirements for tax purposes is a mid-year convention, resulting in tax amortization of 10% in the year of acquisition, 20% in the following four years, and 10% in the final year.

The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions. These deductions can vary from year to year and, consequently, the amount of income taxes paid in future years will vary from the amounts paid in prior years.

The Company's estimated annual 2025 effective tax rate, excluding discrete events, is approximately 25.4%. We file income tax returns in the U.S., state and foreign income tax jurisdictions. We are subject to U.S. income tax examinations for the tax years 2021 to present, and to non-U.S. income tax examinations for the tax years 2020 to present. In addition, we are subject to state and local income tax examinations for tax years 2020 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.