INCOME TAXES

3 Months Ended

Mar. 31, 2024

INCOME TAXES

INCOME TAXES

5.    INCOME TAXES

The Company’s effective tax rate on the net income before income taxes was 16.6% and 18.9% for the three months ended March 31, 2024 and 2023, respectively.  

A reconciliation of the federal statutory corporate tax rate to the Company’s effective tax rate is as follows:

	Three Months Ended		Three Months Ended
	March 31, 2024		March 31, 2023
U.S. statutory federal tax rate	21.0	%	21.0	%
State tax, net of federal tax	0.8	%	0.1	%
Stock options	—	%	(1.0)	%
Section 162(m); Limit on Compensation	1.8	%	—	%
Return-to-provision and other	(7.0)	%	(1.2)	%
Effective tax rate	16.6	%	18.9	%

The Company uses the recognition and measurement provisions of the FASB ASC Topic 740, Income Taxes (“Topic 740”), to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence  should be commensurate with the extent to which it can be objectively verified. The Company reviewed the operating results, as well as all of the positive and negative evidence related to realization of such deferred tax assets, to evaluate the need for a valuation allowance at March 31, 2024 and 2023.  As a result of this review, the Company concluded that a $283 thousand valuation allowance is needed for state net operating losses as of March 31, 2024.  

The effective tax rate for the three months ended March 31, 2024 was different from the federal statutory rate due primarily to compensation limits under IRC Section 162(m).