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Income Taxes | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We are the sole managing member of System1 Holdings and, as a result, consolidate the financial results of System1 Holdings. System1 Holdings is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, System1 Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by System1 Holdings is passed through to and included in the taxable income or loss of its members, including us, on a pro rata basis. We are subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of System1 Holdings, as well as any stand-alone income or loss generated by us. We recorded an income tax expense of $0.6 million and $0.4 million for the three and nine months ended September 30, 2024 and a benefit from income taxes of $1.1 million and $11.6 million for the three and nine months ended September 30, 2023, respectively. The effective tax rate was (2.0)% and (0.5)% for the three and nine months ended September 30, 2024, respectively and 4.1% and 11.9% for the three and nine months ended September 30, 2023, respectively. The provision for income taxes differs from the amount of income tax computed by applying the U.S. statutory federal tax rate of 21% to the loss before income taxes due to the exclusion of non-controlling loss, state taxes, foreign rate differential, non-deductible expenses, changes to tax reserves, return to provision true-ups, increase to the valuation allowance related to unrealizable deferred tax assets, and outside basis adjustments. As of September 30, 2024, we had a full valuation allowance on our U.S. federal and state net deferred tax assets as it was more likely than not that those deferred tax assets would not be realized. During the three and nine months ended September 30, 2024 and 2023, inclusive of interest, no payments were made to the parties to the Tax Receivable Agreement. The total amount of Tax Receivable Agreement Payments due under the Tax Receivable Agreement was $0.9 million and $0.8 million as of September 30, 2024 and December 31, 2023, respectively.

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