Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

10. INCOME TAXES  

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following is a summary of our provision for (benefit from) income taxes and effective tax rate from continuing operations:

	For the Quarter to Date Ended September 30,						For the Year to Date Ended September 30,
(Dollars in Thousands)	2021			2020			2021			2020
Pretax income	$	37,327		$	32,755		$	114,305		$	109,952
Provision for (benefit from) income taxes	$	9,557		$	(7,206	)	$	29,121		$	12,670
Effective rate		25.6	%		-22.0	%		25.5	%		11.5	%

As of December 31, 2020, a valuation allowance of $29.0 million was maintained with respect to our foreign tax credits not supported by an Overall Domestic Loss (“ODL”) account balance and certain state net operating losses. After considering both positive and negative evidence related to the realization of the deferred tax assets, we have determined that it is necessary to continue to maintain a $29.0 million valuation allowance against our non-ODL supported foreign tax credits and state net operating losses as of September 30, 2021.

The effective tax rate for the quarter and year to date ended September 30, 2021 was impacted by federal and state tax credits claimed for the 2020 tax return, which decreased the effective tax rate for the quarter and year to date by 0.6% and 0.2%, respectively. The tax effect of stock-based compensation and the release of previously recorded tax reserves for the 2021 year to date tax rate reflects a 0.5% net benefit. The effective tax rate for the quarter and year to date ended September 30, 2020 reflects a $16.0 million valuation allowance release related to our ODL supported foreign tax credit carryforwards, which decreased the effective tax rate for the quarter and year to date by 49.0% and 14.6%, respectively. The 2020 year to date effective tax rate also reflects a 0.6% net benefit attributable to the tax effect of stock-based compensation and the release of previously recorded tax reserves.

We estimate that it is reasonably possible that the gross liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $1.6 million in the next twelve months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. The income tax rate for the quarter and year to date ended September 30, 2021 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of September 30, 2021, we had accrued $1.9 million as an estimate for reasonably possible interest and accrued penalties.

Our tax returns are routinely examined by federal, state and local tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service has completed its examination of our U.S. income tax returns through our tax year ended December 31, 2014.