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INCOME TAXES
 6 Months Ended
Jun. 30, 2024
INCOME TAXES  
INCOME TAXES

NOTE 6—INCOME TAXES

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Three Months Ended

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Six Months Ended

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June 30, 

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June 30, 

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2024

    

2023

    

2024

    

2023

 

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Effective income tax rate

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(42.7)

%  

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6.7

%  

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(21.9)

%  

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9.5

%

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Provision for income taxes for the three and six months ended June 30, 2024 totaled $20.3 million and $25.7 million, respectively, resulting in an effective tax rate of (42.7)% and (21.9)%, respectively. Benefit from income taxes for the three and six months ended June 30, 2023 totaled $25.1 million and $41.8 million, respectively, resulting in an effective tax rate of 6.7% and 9.5%, respectively.

The most significant drivers of the decrease in the effective income tax rate for the three and six months ended June 30, 2024 compared to the prior year was the increase in losses not anticipated to provide a tax benefit, due to the increase in valuation allowances primarily in the United States and Switzerland recorded in the fourth quarter of 2023, along with the establishment of a valuation allowance in the amount of $13.7 million for the Company’s China Subsidiary recorded in the second quarter 2024. Additionally, in June 2024, the Company increased its reserve in the amount of $3.5 million for unrecognized tax benefits related to its ongoing tax examination in China.

In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. Management believes there is enough negative evidence to determine that it is no longer more likely than not that the net deferred tax assets will be realized in the Company’s China subsidiary as of June 30, 2024. Among this evidence is the cumulative loss, magnitude of business losses in 2023 and 2024, and the current adverse economic conditions. These negative factors combined with no other tax planning strategies identified that could allow the Company to utilize its deferred tax assets, resulted in Management’s decision to establish a full

valuation allowance against the net deferred tax asset position, resulting in $13.5 million of additional tax expense recorded in the three and six months ended June 30, 2024.