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Income Taxes | 6 Months Ended
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Jun. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s provision for income taxes during interim reporting periods has historically been calculated by applying an estimate of the annual effective tax rate for the full fiscal year to pretax income (loss) excluding unusual or infrequently occurring discrete items for the reporting period. When a reliable estimate cannot be made, the C ompany computes the interim provision based on the actual effective tax rate for the year-to-date period by applying the discrete method. The Company determined that given small changes in estimated ordinary income would result in significant variation in the estimated annual effective tax rate for the current year and the resulting uncertainty of the impact on the valuation allowance, the discrete method represents the best estimate of the actual effective tax rate and the Company has calculated its effective tax using the discrete method for the three and six months ended June 30, 2024. The Company’s effective tax rate for the three and six months ended June 30, 2024 was an expense of 3.1% and 37.5%, respectively, on pre-tax income, compared to an expense of 19.3% and 18.3%, respectively, on pre-tax income for the three and six months ended June 30, 2023. The effective tax rate for the three months ended June 30, 2024 was lower than the statutory rate primarily related to a decrease in the Company’s valuation allowance relating to U.S. federal and state net operating losses. The effective tax rate for the six months ended June 30, 2024 was higher than the statutory rate primarily due to the non-deductibility of certain executive compensation costs and other employee benefits, as well as shortfalls related to the vesting and exercise of the Company’s share-based awards offset by a decrease in the valuation allowance. The Company’s effective tax rate for the three and six months ended June 30, 2023 was lower than the statutory rate primarily due to excess tax benefits associated with the Company’s stock-based compensation arrangements. The Company accounts for income taxes using the asset and liability method. Deferred income taxes are recognized for the tax consequences of temporary differences between the tax and financial statement reporting bases of assets and liabilities. Quarterly, the Company assesses whether it is more likely than not that sufficient taxable income will be generated to realize deferred income tax assets, and a valuation allowance is recorded when it is more likely than not that some portion, or all, of the Company’s deferred tax assets, will not be realized. The Company considers sources of taxable income from prior period carryback periods, future reversals of existing taxable temporary differences, tax planning strategies and future projected taxable income when assessing the future realization of deferred tax assets. In assessing the sources of taxable income and the need for a valuation allowance, the Company considers all available positive and negative evidence, which includes a recent history of cumulative losses. As of June 30, 2024, the Company remains in a historical three-year cumulative loss position, which is significant objective negative evidence in considering whether deferred tax assets are realizable. Such objective negative evidence outweighs other subjective positive evidence, such as the projection of future taxable income. As a result, as of June 30, 2024, the Company has a valuation allowance of $35 million against its deferred tax assets for U.S. federal and state net operating loss carryforwards, which includes reductions in the Company’s valuation allowance of $7 million and $2 million, respectively, recorded during the three and six months ended June 30, 2024.

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