Income Taxes

6 Months Ended

Jun. 30, 2019

10.

Income Taxes

The tax provision is based on the estimated annual effective tax rate for the year, which includes estimated federal, state and foreign income taxes on the Company’s projected

pre-tax

income.

The provision for income taxes and the effective income tax rates were as follows (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Provision for income taxes	$	113		$	363		$	539		$	497
Effective income tax rate		4.2	%		4.4	%		7.3	%		4.0	%

The effective tax rates were lower than the statutory tax rates for the three and six months ended June 30, 2019 and 2018 due primarily to the utilization of net operating loss carryforwards and tax credits. The provisions for income taxes in the three and six months ended June 30, 2019 and 2018 also included estimated foreign income taxes and estimated state taxes in jurisdictions in which the Company does not have net operating loss carryforwards.

As of June 30, 2019, the Company has a valuation allowance of approximately $30,031,000 against all domestic net deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. While recent positive operating results caused the Company to be in a cumulative income position as of June 30, 2019, it has been in such a position for only a limited number of quarters. In addition, some uncertainty in economic conditions that could potentially impact the Company has led management to conclude a full valuation allowance against all domestic net deferred tax assets is still warranted as of June 30, 2019. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If the positive quarterly earnings continue, the Company may release all or a portion of the valuation in the near-term. If and when the Company determines the valuation allowance should be released (i.e., reduced), the adjustment would result in a tax benefit reported in that period’s Consolidated Statements of Operations, the effect of which would be an increase in reported net income.