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INCOME TAXES
 9 Months Ended
Sep. 30, 2023
INCOME TAXES  
INCOME TAXES

19.  INCOME TAXES

The Company records income tax expense during interim periods based on the best estimate of the full year’s tax rate as adjusted for discrete items, if any, that are taken into account in the relevant interim period. Each quarter, the Company updates its estimate of the annual effective tax rate and any change in the estimated rate is recorded on a cumulative basis. The effective tax rate from continuing operations was 22.9% and 34.4% for the three months ended September 30, 2023 and 2022, respectively, and 27.7% and 61.8% for the nine months ended September 30, 2023 and 2022, respectively.

The effective tax rate for the three months ended September 30, 2023 is lower than it was for the same period in 2022 primarily as a result of the release of income tax reserves associated with penalties and interest thereon as a result of the remeasurement of tax reserves related to Section 199 deduction claims which were in dispute with the Internal Revenue Service (“IRS”). The Company has reached a settlement with the IRS under which the Company has conceded all the claimed Section 199 deductions in exchange for the IRS’s concession of penalties asserted on the Company’s Section 199 deductions. Although the parties had not completed all legal procedures to affect the settlement at September 30, 2023, the IRS provided a written response agreeing to these terms prior to September 30, 2023. The Company accordingly remeasured its Section 199 tax reserve liabilities and released its reserves associated with penalties and interest thereon for its Section 199 claims as of September 30, 2023. Subsequent to September 30, 2023, the parties have completed all legal procedures to affect the settlement.

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The lower effective tax rate for the nine months ended September 30, 2023 compared to the same period in 2022 is primarily due to the circumstances outlined above, coupled with lower income before income tax provision for the nine months ended September 30, 2022 as a result of the Cboe Digital goodwill impairment.

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