Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

        The Company's provision for income taxes for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period.

The Company's quarterly tax provision, and estimate of its annual effective tax rate, is subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company does business, and tax law developments. The Company's estimated effective tax rate for the year differs from the U.S. statutory rate of 21% primarily due to non-deductible stock-based compensation expense, state taxes, and the benefit of U.S. federal income tax credits and foreign-derived intangible income deduction.

        The Company recorded an income tax provision of $0.8 million and $2.3 million for the three months ended June 30, 2020 and 2019, respectively, resulting in an effective tax rate of 2.9% and 12.3%, respectively. The tax provision for the three months ended June 30, 2020 as compared to the tax provision for the three months ended June 30, 2019 changed primarily due to higher excess tax benefits from stock-based compensation in the current period.

The Company recorded an income tax provision of $4.3 million and $4.8 million for the six months ended June 30, 2020 and 2019, respectively, resulting in an effective tax rate of 8.7% and 14.1%, respectively. The tax provision for the six months ended June 30, 2020 as compared to the tax provision for the six months ended June 30, 2019 changed primarily due to higher excess tax benefits from stock-based compensation in the current period.

As of June 30, 2020, the Company had unrecognized tax benefits of $8.4 million, of which $4.2 million, if recognized, would favorably impact the Company's effective tax rate. As of December 31, 2019, the Company had unrecognized tax benefits of $7.8 million, of which $4.2 million, if recognized, would favorably impact the Company's effective tax rate. The Company does not anticipate a material change in its unrecognized tax benefits in the next 12 months.

On June 29, 2020, the California governor signed into law the 2020 Budget Act, which temporarily suspends the utilization of net operating losses and limits the utilization of the research credit to $5 million annually for 2020, 2021 and 2022. The Company is continuing to assess the 2020 Budget Act, but currently does not expect any material impact to the condensed consolidated financial statements.