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Income Taxes
 9 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company calculates its interim income tax provision in accordance with ASC Topic 270, “Interim Reporting,” and ASC Topic 740, “Accounting for Income Taxes.” At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.
In March 2021, the Company acquired Topgolf through a non-taxable stock acquisition in a share exchange. The purchase price of Topgolf at acquisition was approximately $3,014.2 million. As noted in Note 5, during the three months ended March 31, 2022, the Company finalized its fair value determination of the acquired assets and assumed liabilities and completed its assessment of the purchase price allocation. Based on new information about facts and circumstances that existed at the acquisition date, the Company recorded an additional goodwill adjustment of $12.2 million, a decrease in valuation allowances accrued of $2.8 million, and a discrete income tax benefit of $15.0 million during the three months ended March 31, 2022.
The realization of deferred tax assets, including loss and credit carryforwards, is subject to the Company generating sufficient taxable income during the periods in which the deferred tax assets become realizable. As a result of the Topgolf merger and the fact that Topgolf’s losses exceed the Company’s income in recent years, the Company has determined that it is not more likely than not that a portion of its U.S. deferred tax assets will be realized. The valuation allowance on the Company’s U.S. deferred tax assets as of September 30, 2022 primarily relate to federal and state deferred tax assets related to tax attributes that the Company estimates are not more likely than not to be utilized prior to expiration. However, if the Company’s more recent earnings history were to continue, management believes that it is possible that within the next 12 months sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets with a potential corresponding decrease to income tax expense for the period the release is recorded, which would represent a non-cash benefit. The exact timing and amount of the valuation allowance release would be predicated on continued profitability of the Company combined with the continued profitability it believes it can maintain. With respect to non-U.S. entities, there continues to be sufficient positive evidence to conclude that realization of the Company’s deferred tax assets is more likely than not under applicable accounting rules, and therefore no significant valuation allowances have been established.

The Company recorded an income tax provision of $0.3 million and $66.2 million for the three months ended September 30, 2022 and 2021, respectively. As a percentage of pre-tax income, the Company’s effective tax rate was 0.8% and 131.8% for the three months ended September 30, 2022 and 2021, respectively. In the three months ended September 30, 2022, the primary difference between the statutory rate and the effective rate relates to the partial release of valuation allowances on the Company’s deferred tax assets. In the three months ended September 30, 2021, the primary difference between the statutory rate and the effective rate relates to utilizing the annual effective tax rate method for the three months ended September 30, 2021 instead of utilizing the discrete effective tax rate method, which was used for the three months ended June 30, 2021.
The Company recorded an income tax benefit of $12.5 million and an income tax provision of $98.1 million for the nine months ended September 30, 2022 and 2021, respectively. As a percentage of pre-tax income, the Company’s effective tax rate was a benefit of 5.7% for the nine months ended September 30, 2022, compared to a provision of 22.0% for the nine months ended September 30, 2021. In the nine months ended September 30, 2022, the primary difference between the statutory rate and the effective rate relates to the release of valuation allowances on the Company’s deferred tax assets. In the nine months ended September 30, 2021, the primary difference between the statutory rate and the effective rate relates to excluding the book gain on pre-merger Topgolf shares for tax purposes offset by valuation allowances on the Company’s deferred tax assets.
At September 30, 2022, the gross liability for income taxes associated with uncertain tax positions was $26.1 million. Of this amount, $10.5 million would benefit the Company’s consolidated condensed financial statements and effective income tax rate if favorably settled. The Company recognizes interest and penalties related to income tax matters in income tax expense.