Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company computes its provision (benefit) 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 an income tax benefit of $3.4 million and provision for income taxes of $1.4 million for the three months ended March 31, 2023 and 2022, respectively. Accordingly, the Company has recorded the tax benefit for the U.S. losses incurred during the three months ended March 31, 2023.

The effective income tax rate was 37% and 23% for the three months ended March 31, 2023 and 2022, respectively. The income tax benefit for the three months ended March 31, 2023 is related to an increase in nondeductible stock-based compensation, Section 162(m) limitation on the tax deductibility of officers compensation, state taxes and global intangible low-taxed income (GILTI) inclusion offset by deductions for equity awards, tax benefit from foreign-derived intangible income (FDII), foreign tax credits, federal and state research credits, and other effects created by the capitalization and amortization of research and development expenses for tax purposes.

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.