Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company computes its provision for income taxes by applying the estimated annual effective tax rate to pretax income and adjusts the provision for discrete tax items recorded in the period.

The Company recorded a provision for income taxes of $1.4 million and $1.9 million for the three months ended March 31, 2022 and 2021, respectively.

The effective income tax rate was 23% and 28% for the three months ended March 31, 2022 and 2021, respectively. The effective tax rate in the quarter ended March 31, 2022 includes a benefit of 5% primarily related to an incremental foreign derived intangible income (FDII) benefit partially offset by global intangible low-taxed income (GILTI) and other effects created by the capitalization and amortization of R&D expenses for tax purposes starting on January 1, 2022, which was primarily due to a change in Section 174 of the Tax Cuts and Jobs Act of 2017.

Realization of the Company’s deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance, the Company considers its historical, as well as future projected, taxable income along with other objectively verifiable evidence. Objectively verifiable evidence includes the Company’s realization of tax attributes, assessment of tax credits, and utilization of net operating loss carryforwards during the year.