Income Taxes |
6 Months Ended |
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Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date loss. The Company’s annual estimated effective tax rate differs from the statutory rate primarily as a result of state taxes, tax amortization of goodwill and changes in the Company’s valuation allowance. The Company recorded an income tax expense of $0.1 million in each of the three months ended June 30, 2020 and 2019. The Company recorded an income tax benefit of $0.3 million and income tax expense of $0.2 million for the six months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020, the $0.3 million tax benefit arose in connection with the impairment of goodwill during the first quarter of 2020, resulting in reduction of indefinite-lived deferred tax liabilities. There were no material changes to the Company’s unrecognized tax benefits in the six months ended June 30, 2020, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of the fiscal year. Due to the presence of net operating loss (“NOL”) carryforwards, all income tax years remain open for examination by the IRS and various state taxing authorities. The Internal Revenue Code of 1986, as amended (the “IRC”), imposes substantial restrictions on the utilization of net operating losses and other tax attributes in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use pre-change net operating loss and research tax credits may be limited as prescribed under IRC Sections 382 and 383. Events that may cause a limitation in the amount of the net operating losses and credits that the Company uses in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. The Company experienced a cumulative ownership change as of December 31, 2019 within the meaning of IRC Sections 382 and 383. As a result of this ownership change, the Company estimates that up to $86.8 million and $2.5 million of federal and state net operating loss carryforwards, respectively, may expire unused. Similarly, the Company estimates that up to $0.8 million of federal research and development credit carryforward may expire unused. The Section 382 limitation resulted in a reduction of deferred tax assets of $18.4 million and would be fully offset by a corresponding decrease in its valuation allowance, with no net tax provision impact. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 public health emergency. The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. In addition, on June 29, 2020 California enacted legislation suspending NOL deductions for taxpayers with more than $1 million of business income and imposing limits on the use of tax credits up to $5 million effective for tax years 2020 through 2022. The changes in tax law did not have a material impact on the Company’s results of operations for the three and six months ended June 30, 2020. The Company will continue to monitor possible future impact of changes in tax legislation. |