Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes [Abstract]

Income Taxes

8.INCOME TAXES

Income tax expense or benefits are recorded relative to the jurisdictions that recognize book earnings. For the three months ended March 31, 2023, the Company recognized an income tax expense of $1.6 million on pre-tax earnings of $4.7 million, representing an effective income tax rate of 34.9% compared to income tax expense of $1.4 million on pre-tax earnings of $4.1 million, representing an effective income tax rate of 34.6% for the same period in 2022.

For the three months ended March 31, 2023, the Company computed an annual effective tax rate using forecasted information. Based on current forecasts, the Company’s effective tax rate is expected to be highly sensitive to changes in earnings. The Company concluded that computing its effective tax rate using forecasted information would be appropriate in estimating tax expense for the three months ended March 31, 2023.

A number of items caused the effective income tax rate for the three months ended March 31, 2023 to differ from the US federal statutory income tax rate of 21%, including taxation of global intangible low-tax income (GILTI) in the United States, a 23% statutory tax rate in Canada, certain nondeductible business expenses in Poland, and various exchange rate benefits. As of March 31, 2023, the Company continues to maintain a full valuation allowance on deferred tax assets for CMR, CRM and Century Resorts International Ltd.

Additionally, the Company has unrecognized tax benefits of $0.5 million due to the Company’s ability to utilize pre-acquisition net operating losses. The Company received notification of an examination by Canada Revenue Agency, and it will assess the ability to recognize the $0.5 million in tax benefits upon completion of the examination. The Company believes that the examination will not conclude until 2024.