XML 26 R16.htm IDEA: XBRL DOCUMENT v3.25.1
INCOME TAXES
 3 Months Ended
Mar. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Effective tax rate
The Company determines the tax provision for interim periods using an estimate of our annual effective tax rate ("ETR") adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual ETR, and if our estimated annual ETR changes, we make a cumulative adjustment. If a reliable estimate of the annual ETR cannot be made, the actual ETR for the year to date may be the best estimate of the annual ETR.
Our estimated annual ETR, including discrete items, for the three months ended March 31, 2025, was 90.7% compared to 42.7% for the three months ended March 31, 2024. The primary contributing factors to the difference between the estimated annual ETR for the three months ended March 31, 2025 of 90.7% and the statutory tax rate of 21%, are the increase in the federal and state valuation allowance on deferred tax assets and the decrease related to the windfall tax benefit from the restricted stock awards (“RSAs”) vested during the quarter. The estimated annual ETR differs from the comparable quarter primarily as a result of the increase in the valuation allowance, which was initially established during the quarter ended September 30, 2024.
The Company recognized $4.5 million of income tax expense for the three months ended March 31, 2025, primarily driven by its expected current taxable income and the valuation allowance against deferred tax assets.
Valuation allowance                                                                
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ending March 31, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.                            
The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are adjusted, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future growth.