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INCOME TAXES
 6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

11. INCOME TAXES

 

The Company’s tax provision or benefit from income taxes for interim periods is generally determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any. Each quarter the Company updates its estimate of the annual effective tax rate and makes a year-to-date adjustment to the provision. However, for the six months ended June 30, 2022, the estimated annual effective tax rate presented a distorted amount of expense in relation to the year-to-date results. As such, the Company has determined the tax benefit for the six months ended June 30, 2022 on an actual year-to-date basis instead of applying the estimated annual effective tax rate. The Company’s effective tax rate was approximately 45.5% and 0.0% for the six months ended June 30, 2022 and 2021, respectively. The primary difference in the Company’s effective tax rate and the statutory rate for the six months ended June 30, 2022 related to the movement in the valuation allowance against the Company’s net deferred tax assets.

 

The Company’s income tax benefit for the six months ended June 30, 2022 includes a discrete income tax benefit of $2.4 million related to the release of a portion of the Company’s previously established valuation allowance to offset deferred tax liabilities arising from the January 5, 2022 transaction.

 

Deferred taxes are recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets, liabilities, net operating losses and tax credit carry-forwards. We review our deferred tax assets (“DTAs”) and valuation allowance on a quarterly basis. As part of our review, we consider positive and negative evidence, including cumulative results in recent years. The January 5, 2022 transaction triggered an Internal Revenue Code (IRC) Section 382 ownership change, and therefore placed additional limitations on the Company’s pre-transaction net operating loss (NOL) and other tax attributes.

 

The Company recognizes, measures, and discloses uncertain tax positions whereby tax positions must meet a “more-likely-than-not” threshold to be recognized. During the six months ended June 30, 2022 and 2021, no adjustments were recognized for uncertain tax positions.