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Income Taxes
 3 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

(7) Income Taxes

The Company computes its year-to-date provision for (benefit from) income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for (benefit from) income taxes for discrete tax items recorded in the period. The estimated effective tax rate is subject to fluctuation based on the level and mix of earnings and losses by tax jurisdiction, foreign tax rate differentials, and the relative impact of permanent book to tax differences. Each quarter, a cumulative adjustment is recorded for any fluctuations in the estimated annual effective tax rate as compared to the prior quarter. As a result of these factors, and due to potential changes in the Company’s period-to-period results, fluctuations in the Company’s effective tax rate and respective tax provisions or benefits may occur. For the three months ended March 31, 2022, the Company recorded a benefit from income taxes of $48.0 million on a pretax loss of $178.8 million, which resulted in an effective tax rate of 26.9%. For the three months ended March 31, 2021, the Company recorded a benefit from income taxes of $74.3 million on a pretax loss of $184.3 million, which resulted in an effective tax rate of 40.3%. The change in the effective tax rate in 2022 is primarily due to higher excess tax benefits from share-based compensation expense in 2021 as compared to 2022.

As of March 31, 2022, the Company had a valuation allowance of $1.0 million primarily related to certain foreign tax credit carryforward tax assets that, in the Company’s present estimation, more likely than not will not be realized. If the market value of bitcoin declines or the Company is unable to regain profitability in future periods, the Company may be required to increase the valuation allowance against its deferred tax assets, which could result in a charge that would materially adversely affect net income (loss) in the period in which the charge is incurred. The Company will continue to regularly assess the realizability of deferred tax assets.

The Company records liabilities related to its uncertain tax positions. As of March 31, 2022 and December 31, 2021, the Company had gross unrecognized tax benefits of $6.2 million, of which $2.1 million was recorded in “Other long-term liabilities” and $4.1 million was recorded in “Deferred tax assets, net” in the Company’s Consolidated Balance Sheets.