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

11. INCOME TAXES

 

The Company’s tax provision or benefit from income taxes for interim periods is 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. The Company’s effective tax rate was approximately 4% and 43% for the three months ended March 31, 2023 and 2022, respectively. The primary difference in the Company’s effective tax rate and the statutory rate for the three months ended March 31, 2023 related to the movement in the valuation allowance against the Company’s net deferred tax assets.

 

The Company’s income tax benefit for the three months ended March 31, 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 Section 382 ownership change, and therefore placed additional limitations on the Company’s pre-transaction NOL and other tax attributes. As such, the Company is projecting that as of December 31, 2023 it will not have sufficient DTAs available to offset the expected future taxable income that will be generated by the realization of the Company’s deferred tax liabilities.

 

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 three months ended March 31, 2023 and 2022, no adjustments were recognized for uncertain tax positions.