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Income Taxes
 9 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

Provision (benefit) for income taxes is as follows:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In Thousands)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

State

 

 

170

 

 

 

(119

)

 

 

1,067

 

 

 

(581

)

Total Current

 

$

170

 

 

$

(119

)

 

$

1,067

 

 

$

(581

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

1,557

 

 

$

135

 

 

$

32,236

 

 

$

(2

)

State

 

 

(947

)

 

 

3

 

 

 

(1,026

)

 

 

396

 

Total Deferred

 

$

610

 

 

$

138

 

 

$

31,210

 

 

$

394

 

Provision (benefit) for income taxes

 

$

780

 

 

$

19

 

 

$

32,277

 

 

$

(187

)

For the three and nine months ended September 30, 2022 and 2021, the current provision (benefit) for state income taxes shown above includes regular state income tax, provisions for uncertain state income tax positions, the impact of state tax law changes and other similar adjustments.

Our estimated annual effective rate for 2022 includes the impact of permanent tax differences, limits on deductible compensation, valuation allowances and other permanent items.

We considered both positive and negative evidence in our determination of the need for valuation allowances for deferred tax assets. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of financing activities and our quarterly results. Based on our analysis, we currently believe that it is more-likely-than-not our federal deferred tax assets will be able to be utilized. Thus, we estimate a $12.7 million reduction in the related valuation allowance associated with these federal deferred tax assets will be recognized throughout the year as part of the estimated annual effective tax rate applied to ordinary income. We have determined it is more-likely-than-not that a portion of our state deferred tax assets will not be able to be utilized. However, we estimate a $7.7 million reduction in the related valuation allowance associated with these state deferred tax assets will be recorded during the year.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

7. Income Taxes (continued)

The tax provision for the nine months ended September 30, 2022 was $32.3 million (16.4% provision on pre-tax income). The tax benefit for the nine months ended September 30, 2021 was $0.2 million (15% benefit on pre-tax income). For both periods, the effective tax rate is less than the statutory tax rate primarily due to the impact of the valuation allowances. For the nine months ended September 30, 2021, the effective tax rate was also impacted by the PPP loan forgiveness and state tax law changes.

LSB and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2018-2021 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other major tax jurisdictions. Additionally, the 2013-2017 years remain subject to examination for determining the amount of net operating loss and other carryforwards.