XML 31 R20.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
 9 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s effective tax rate for both the three and nine months ended September 30, 2021 (Successor) was 0.0%. The Company’s effective tax rates for the three and nine months ended September 30, 2020 (Predecessor) were 9.8% and 5.5%, respectively.
The effective tax rates for the three and nine months ended September 30, 2021 and 2020 were lower than the statutory federal rate of 21% primarily as a result of the Company’s valuation allowance, which was initially recorded against substantially all of the Company’s net deferred tax assets as of March 31, 2020 and was maintained as of September 30, 2021.
The Company’s estimated valuation allowance as of September 30, 2021 was $529.8 million, which decreased $35.6 million from $565.4 million as of December 31, 2020. The Company concluded it is more likely than not that some or all of the benefits from its deferred tax assets will not be realized, and as such, recorded a valuation allowance on these assets. Management assesses the available positive and negative evidence, including future reversals of temporary differences, tax-planning strategies and future taxable income, to estimate whether sufficient future taxable income will be generated to permit the use of deferred tax assets. If the Company concludes it is more likely than not that a portion, or all, of its deferred tax assets will not be realized, the deferred tax asset is reduced by a valuation allowance. A significant piece of objective negative evidence evaluated is the cumulative loss incurred over recent years, excluding the impact of the voluntary restructuring under Chapter 11 of the Bankruptcy Code in 2020. Such objective negative evidence limits the ability to consider other subjective positive evidence. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income change 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 future growth. The Company evaluates the appropriateness of its valuation allowance on a quarterly basis.
Upon emergence from bankruptcy, the Company experienced an “ownership change” as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Under Section 382 of the Code, the Company’s net operating loss carryforwards and other tax attributes (collectively, the “Tax Benefits”) are potentially subject to various limitations going forward. Prior to June 30, 2021, the Company had not determined whether it would be eligible for, and would utilize the exception under Section 382(l)(5) of the Code, which allows for no limitations going forward; accordingly, the limitation was previously determined under Section 382(l)(6) of the Code. After additional consideration and review, the Company concluded it qualifies for treatment under Section 382(l)(5) of the Code and utilized this exception with the filing of its 2020 tax return. As a result, the Company expects to owe no cash taxes for the 2021 tax year. Prior to determining it could utilize the exception under Section 382(l)(5) of the Code, the Company made an estimated income tax payment of $20.0 million during the second quarter of 2021, which the Company expects to be refunded in the first quarter of 2022. This refund amount of $20.0 million is recorded under accounts receivable, net on the Condensed Consolidated Balance Sheet at September 30, 2021.