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INCOME TAXES
 3 Months Ended
Mar. 31, 2022
INCOME TAXES  
INCOME TAXES

5.    INCOME TAXES

The Company’s effective tax rate on the net income before income taxes was 43.2% and 26.9% for the three months ended March 31, 2022 and 2021, respectively.  

A reconciliation of the federal statutory corporate tax rate to the Company’s effective tax rate is as follows:

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Three Months Ended

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Three Months Ended

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March 31, 2022

    

March 31, 2021

    

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U.S. statutory federal tax rate

 

21.0

%  

21.0

%  

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State tax, net of federal tax

 

3.2

%  

5.9

%  

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Stock options

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5.2

%  

—

%  

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Out of period adjustment

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4.0

%  

—

%  

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Rate Change

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8.1

%  

—

%  

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Other

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1.7

%  

—

%  

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Effective tax rate

 

43.2

%

26.9

%

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The Company uses the recognition and measurement provisions of the FASB ASC Topic 740, Income Taxes (“Topic 740”), to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should be commensurate with the extent to which it can be objectively verified. As a result, the Company reviewed the operating results, as well as all of the positive and negative evidence related to realization of such deferred tax assets to evaluate the need for a valuation allowance at March 31, 2022 and 2021.

The effective tax rate for the three months ended March 31, 2022 and 2021 was different from the federal statutory rate due primarily to stock-based compensation, an out of period adjustment due to compensation limits under IRC Section 162(m), and a change in the estimate of the apportionment of earnings across various state jurisdictions.