INCOME TAXES

9 Months Ended

Sep. 30, 2020

Our total income tax expense/(benefit) for our loss before income taxes were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Loss before income taxes and equity in losses of unconsolidated affiliates	$	(1,808)	$	(734)	$	(15,224)	$	(1,380)
Total income tax expense (benefit)	$	3,413	$	(530)	$	1,693	$	(1,966)

There were cash payments for income taxes of $0.5 million and $0.8 million for the three and nine months ended September 30, 2020, respectively, and there were cash payments of $1 thousand and cash refunds, net of payments, of $0.1 million, respectively, for income taxes for the three and nine months ended September 30, 2019. The Company’s tax expense was $3.4 million and $1.7 million for the three and nine months ended September 30, 2020, respectively, compared to the tax benefit of $0.5 million and $2.0 million for the three and nine months ended September 30, 2019, respectively. The increase in tax expense in the nine month period is due to the higher financial loss offset by a $3.9 million increase in the partial valuation allowance further discussed below. The Company recognized $0.1 million in excess tax benefits related to employee share-based compensation for the three months ended September 30, 2020, compared to $0.1 million recognized for the three months ended September 30, 2019. The Company recognized $0.5 million in excess tax benefits related to employee share-based compensation for the nine months ended September 30, 2020, compared to $1.5 million recognized for the nine months ended September 30, 2019.

The Company considered multiple factors in assessing the need for an increase in the partial valuation allowance against the Company’s deferred tax assets as of September 30, 2020. Significant factors such as the continued challenge and uncertainty of the COVID-19 pandemic, increased future stock compensation expenses from achievement of Company performance metrics, required capitalization of research and development expenses beginning in 2022 and acquisition related expenses from our business growth strategy have negatively impacted our future taxable income projections. These future projections indicate a larger portion of the company’s deferred tax assets will likely expire unrealized. As a result, the Company recorded an additional $3.6 million tax effected increase to the current partial valuation allowance against the Company's deferred tax assets during the three months ended September 30, 2020. As of September 30, 2020, the Company had a gross federal net operating loss carryforward of approximately $47.0 million and a gross partial valuation allowance of approximately $40.0 million recorded against the carryforward. The Company

will continue to closely monitor the need for an additional valuation allowance against its deferred tax assets in each subsequent reporting period which can be impacted by actual operating results compared to the Company's forecast.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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