Income Taxes

9 Months Ended

Sep. 30, 2023

Income Taxes

Income Taxes

Note 9 — Income Taxes

Income taxes are estimated for each of the jurisdictions in which the Company operates. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the tax effect of carryforwards. Realization of net deferred tax assets is dependent on future taxable income.

At the end of each interim reporting period, the effective tax rate is aligned with expectations for the full year. This estimate is used to determine the income tax provision on a year-to-date basis and may change in subsequent interim periods.

Income before income taxes and income tax expense (benefit) for the three and nine months ended September 30, 2023 and 2022 were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
	(in thousands, except percentages)
Income (loss) before income taxes	$	22,510	$	15,249	$	(52,521)	$	39,151
Income tax expense (benefit)	$	(2,064)	$	208	$	(516)	$	1,125
Effective tax rate		(9.17)%		1.36%		0.98%		2.87%

The Company’s income tax benefit for the three and nine months ended September 30, 2023 was $2.1 million and $0.5 million, respectively, compared to income tax expense of $0.2 million and $1.1 million for the comparable prior periods.

For the three months ended September 30, 2023, the Company’s income tax benefits primarily consists of a $2.0 million tax benefit associated with the previously unrecognized research and development tax credits recognized upon completion of the Company’s R&D study, as well as tax benefits related to Foreign-Derived Intangible Income and research and development tax credits, partially offset by tax expense related to pre-tax income from operations.

For the nine months ended September 30, 2023, the Company’s income tax benefit primarily consists of a $2.0 million tax benefit associated with the previously unrecognized research and development tax credits recognized upon the completion of the Company’s R&D study, a $0.9 million tax benefit associated with the loss on extinguishment of the 2025 and 2027 Notes pursuant to the limitation on losses from extinguishment of convertible notes under Section 249 of the Internal Revenue Code of 1986, as amended (Section 249), as well as tax benefits related to Foreign-Derived Intangible Income, research and development tax credits, and a discrete benefit for share-based compensation windfall. These tax benefits were partially offset by tax expenses attributed to pre-tax income from operations excluding the loss on extinguishment of the 2025 and 2027 Notes.

For the three and nine months ended September 30, 2022, the effective tax rate was lower than the U.S. statutory tax rate primarily related to changes in the valuation allowance of deferred tax assets in the U.S.