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Income taxes
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Income taxes

Note 10 – Income taxes

 

Income taxes were recognized at effective rates of 37.9% and 18.1% for the three months ended March 31, 2023 and 2022, respectively. The change in the Company’s effective tax rate for the three months ended March 31, 2023 compared to 2022 is primarily driven by the change in method for calculation of period expense. The current period applies the estimated annual rate method. As described below, the period ended March 31, 2022 applied the discrete rate method.

 

The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full year, excluding unusual or infrequently occurring discrete items, and applies that rate to income (loss) before provision for income taxes for the period. In accordance with the authoritative guidance, the Company used a discrete effective tax rate method to calculate income taxes for the quarter ended March 31, 2022 because small changes in the estimated level and mix of annual income or loss by jurisdiction would result in significant changes in the estimated annual effective tax rate making the historical method unreliable.

 

The Company’s effective tax rate may change from period to period based on recurring and non-recurring factors including the relative mix of pre-tax earnings (or losses), the jurisdictional mix of earnings, enacted tax legislation, state income taxes, the impact of non-deductible items, changes in valuation allowances, settlement of tax audits, and the expiration of the statute of limitations in relation to unrecognized tax benefits. The Company records discrete income tax items such as enacted tax rate changes and completed tax audits in the period in which they occur. The Company consistently reflects non-deductible officer compensation expense, non-deductible compensation expense related to equity incentive awards and separate state tax rates from period to period. Although similar items were reflected in 2023, the percentage effect is different due to the difference in pre-tax income (loss) in 2023 compared to 2022.

 

Unrecognized tax benefits were $0 at March 31, 2023 and 2022, respectively. The Company does not expect material changes to its unrecognized tax benefits during the next twelve months. However, the outcome of tax audits cannot be predicted with certainty. If a tax audit is resolved in a manner inconsistent with its expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.