The provision (benefit) for income taxes 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 (benefit) 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,
	2021			2020			2021			2020

Provision (benefit) for income taxes	$	999		$	(406	)	$	856		$	(900	)
Effective income tax rate		4.9	%		(17.9	)%		2.4	%		(2,195.1	)%

The effective tax rates were lower than the statutory tax rates for the three and six months ended June 30, 2021 and 2020 primarily due to the Company’s full valuation allowance position against domestic deferred tax assets. The provision (benefit) for income taxes for the three and six months ended June 30, 2021 and 2020 included estimated federal, state and foreign income taxes in jurisdictions in which the Company does not have sufficient tax attributes to fully offset taxable income.

As of June 30, 2021, the Company had a valuation allowance of approximately $37,856,000 against all net domestic 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, as a result of increases in bookings, caused the Company to be in a cumulative income position as of June 30, 2021, the Company faces uncertainties in forecasting its operating results due to continued negative impacts on the Company’s supply chain, certain process issues with the production of Advanced Products and the unpredictability in certain markets. This operating uncertainty also makes it difficult to predict the availability and utilization of tax benefits over the next several years. As a result, management has concluded, at this time, it is more likely than not the Company’s net domestic deferred tax assets will not be realized, and a full valuation allowance against all net domestic deferred tax assets was still warranted as of June 30, 2021. 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 and increases in bookings continue, and the Company’s concerns about industry uncertainty and world events, including continued negative impacts on the Company’s supply chain, and process issues with the production of Advanced Products are resolved, and the amount of tax benefits the Company is able to utilize to the point that the Company believes future taxable income can be more reliably forecasted, the Company may release all or a portion of the valuation allowance in the near-term. However, the valuation allowance against certain state tax credits will likely never be released due to uncertainty on the utilization of these credits. 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.