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INCOME TAXES
 6 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company calculates the tax provision for interim periods using an estimated annual effective tax rate applied to year-to-date ordinary income and adjusts for discrete items in the quarter. In each quarter, the estimate of the annual effective tax rate is updated and an adjustment is made in the year-to-date provision. The annual effective tax rate is subject to fluctuation due to factors including changing assumptions on forecasted annual pretax income, certain book and tax differences, valuation allowances against deferred tax assets, or changes in or interpretation of tax laws.
The Company’s effective tax rate (“ETR”) for the three months ended June 30, 2023 and 2022 was (23.8)% and 11.8%, respectively. The ETR of (23.8)% for the three months ended June 30, 2023 was lower than the U.S. statutory rate of 21.0% primarily due to a reduction in the estimated annual effective tax rate, non-deductible stock compensation expense and tax on non-U.S. earnings.
The Company’s ETR for the six months ended June 30, 2023 and 2022 was 27.9% and 17.7%, respectively. The ETR of 27.9% for the six months ended June 30, 2023 was higher than the U.S. statutory rate of 21.0% primarily due to a partial release of a valuation allowance on deferred tax assets associated with impairment charges, offset by non-deductible stock compensation expense and tax on non-U.S. earnings.
As of December 31, 2022, the Company had a valuation allowance of $177.2 million recorded against its deferred capital loss tax asset balance of $225.2 million. The Company’s capital loss tax asset is comprised primarily of impairment charges related to crypto assets held and strategic investments made by Coinbase Ventures. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2023, because crypto asset appreciation during the year provided more gains to offset losses, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $60.1 million are realizable, resulting in a partial valuation allowance release of $60.1 million.