Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

(13) Income Taxes

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for U.S. deferred income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are reinvested indefinitely.

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter. The Company’s quarterly tax provision, and its quarterly estimate of its annual effective tax rate, are subject to significant volatility due to several factors, including the Company’s ability to accurately predict its pre-tax income and loss in multiple jurisdictions.

For the three months ended March 31, 2022 and 2021, the Company recorded a benefit from income taxes of $1.1 million and a benefit from income taxes of $5.8 million, respectively, resulting in an effective tax rate of 5.35% and an effective rate of 21.06%, respectively. The benefit of $1.1 million generated in the three months ended March 31, 2022, was primarily generated by losses in foreign jurisdiction which are expected to be realized in the current or future years. For the three months ended March 31, 2021, there were deferred tax liabilities recognized in connection with the preliminary purchase accounting for the Company’s completed acquisitions. Certain of such deferred tax liabilities will be a source of future taxable income to realize a portion of Company’s deferred tax assets, which resulted in a discrete tax benefit of approximately $5.8 million related to U.S. acquired entities being recognized during the three months ended March 31, 2021.

As of March 31, 2022, the Company had gross tax-effected unrecognized tax provision of $1.8 million which, if recognized, would favorably impact the effective tax rate. The Company’s existing tax positions will continue to generate an increase in unrecognized tax benefits in subsequent periods. The Company’s policy is to record interest and penalties related to unrecognized tax benefits as a component of income tax expense. During the three months ended March 31, 2022 and 2021, the amounts recorded related to the accrual of interest and penalties were immaterial in each period.