Income Taxes

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

We apply an estimated annual effective tax rate (“ETR”) approach for calculating a tax provision for interim periods, as required under GAAP. We recorded a benefit for income taxes from continuing operations of $8.5 million and $0.7 million for the six months ended June 30, 2019 and 2018, respectively. Our ETR differs from the U.S. federal statutory tax rate of 21% primarily as a result of nondeductible expenses and the impact of the valuation allowance on our deferred tax assets.

Our provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and credit carryforwards. Deferred tax assets and liabilities are determined using the enacted tax rates in effect for the years in which those tax assets are expected to be realized. A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction by jurisdiction basis, and includes a review of all available positive and negative evidence. We recognize the impact of a tax position in our financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense.

The intraperiod tax allocation guidance requires that we allocate income taxes between continuing operations and other categories of earnings. When we have a year-to-date pre-tax loss from continuing operations and year-to-date pre-tax income in discontinued operations, applicable GAAP (ASC 740-20-45-7) requires that we allocate the income tax provision to other categories of earnings (including discontinued operations), and then record a related tax benefit in continuing operations. For the six months ended June 30, 2019 and 2018, we recognized net income from discontinued operations while sustaining losses from continuing operations. Because of the required allocation, we recorded an income tax benefit for the six months ended June 30, 2019 and 2018 of $8.5 and $0.7 million, respectively, within “benefit (provision) for income taxes from continuing operations” and income tax expense of $7.0 million and $0.7 million, respectively, within “income (loss) from discontinued operations, net of income taxes” on the accompanying Condensed Consolidated Statements of Operations. For the three months ended June 30, 2019 and 2018, we recorded an income tax benefit of $0.2 million and income tax expense of $0.4 million, respectively, within “benefit (provision) for income taxes from continuing operations,” and income tax expense of $0.2 million and income tax benefit of $0.4 million, respectively, within “income (loss) from discontinued operations, net of income taxes” on the accompanying Condensed Consolidated Statements of Operations.

Our net tax benefit for the three and six months ended June 30, 2019, prior to the application of intraperiod tax allocation guidance was $0 and $1.5 million, respectively. The $1.5 million tax benefit arose from the reversal of deferred tax liabilities recorded on our Consolidated Balance Sheets as of December 31, 2018 that were associated with indefinite-lived intangible assets that were sold as part of our Commercial Product Portfolio Transaction. The tax expense for the three and six months ended June 30, 2018, prior to the application of intraperiod tax allocation guidance was $3 thousand and $6 thousand, respectively.