Income Taxes	9 Months Ended
Sep. 30, 2020
Income Taxes
Note 10. Income Taxes	Note 10: Income Taxes The income tax expense we record in any interim period is based on our estimated effective tax rate for the year for each jurisdiction that we operate in. The calculation of our estimated effective tax rate requires an estimate of pre-tax income by tax jurisdiction, as well as total tax expense (benefit) for the fiscal year. Accordingly, this tax rate is subject to adjustment if, in subsequent interim periods, there are changes to our initial estimates of total tax expense (benefit), pre-tax income (loss), or pre-tax income (loss), by jurisdiction. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into the law. The CARES Act contained many income tax relief provisions including allowing for a 5-year carryback of Federal net operating losses generated in tax years beginning in 2018, 2019, or 2020. As required under U.S. GAAP, the effects of tax law changes are recognized in the period of enactment. Accordingly, we have recorded incremental income tax benefit in the amount of $1.6 million associated with the CARES Act related to the carryback of the Company’s 2018 federal net operating loss. During the three months ended September 30, 2020, and 2019, the Company recorded income tax expense of $1,706 and income tax benefit of $2,291, respectively, from operations. During the nine months ended September 30, 2020, and 2019, the Company recorded income tax benefit of $1,503,625 and income tax expense of $835, respectively, from operations. The blended effective tax rate for the nine months ending September 30, 2020, and 2019, was 30.0% and 0.0%, respectively. The effective blended tax rate varies from our statutory U.S. tax rate due to the tax impact of the CARES Act, valuation allowances on losses and income generated in certain other jurisdictions at various tax rates. Valuation Allowance We record a deferred tax asset if we believe that it is more likely than not that we will realize a future tax benefit. Ultimate realization of any deferred tax asset is dependent on our ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any. Our assessment of deferred tax asset recoverability considers many different factors including historical and projected operating results, the reversal of existing deferred tax liabilities that provide a source of future taxable income, the impact of current tax planning strategies and the availability of future tax planning strategies. We establish a valuation allowance against any deferred tax asset for which we are unable to conclude that recoverability is more likely than not. This is inherently judgmental since we are required to assess many different factors and evaluate as much objective evidence as we can in reaching an overall conclusion. The particularly sensitive component of our evaluation is our projection of future operating results since this relies heavily on our estimates of future revenue and expense levels by tax jurisdiction. In making our assessment of deferred tax asset recoverability, we considered our historical financial results, our projected future financial results, the planned reversal of existing deferred tax liabilities, and the impact of any tax planning actions. Based on our analysis we noted both positive and negative factors relative to our ability to support realization of certain deferred tax assets. However, based on the weighting of all the evidence, including the near term effect on our income projections of investments we are making in our team, product and systems infrastructure, we concluded that it was more likely than not that the majority of our deferred tax assets related to temporary differences and net operating losses may not be recovered. The establishment of a valuation allowance has no effect on our ability to use the underlying deferred tax assets to reduce cash tax payments in the future to the extent that we generate taxable income prior to expiration. At September 30, 2020 and December 31, 2019, we established a valuation allowance of $7.08 million and $6.96 million, respectively, against certain deferred tax assets given the uncertainty of recoverability of these amounts.

Income Taxes

9 Months Ended

Sep. 30, 2020

Note 10: Income Taxes

The income tax expense we record in any interim period is based on our estimated effective tax rate for the year for each jurisdiction that we operate in. The calculation of our estimated effective tax rate requires an estimate of pre-tax income by tax jurisdiction, as well as total tax expense (benefit) for the fiscal year. Accordingly, this tax rate is subject to adjustment if, in subsequent interim periods, there are changes to our initial estimates of total tax expense (benefit), pre-tax income (loss), or pre-tax income (loss), by jurisdiction.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into the law. The CARES Act contained many income tax relief provisions including allowing for a 5-year carryback of Federal net operating losses generated in tax years beginning in 2018, 2019, or 2020. As required under U.S. GAAP, the effects of tax law changes are recognized in the period of enactment. Accordingly, we have recorded incremental income tax benefit in the amount of $1.6 million associated with the CARES Act related to the carryback of the Company’s 2018 federal net operating loss.

During the three months ended September 30, 2020, and 2019, the Company recorded income tax expense of $1,706 and income tax benefit of $2,291, respectively, from operations. During the nine months ended September 30, 2020, and 2019, the Company recorded income tax benefit of $1,503,625 and income tax expense of $835, respectively, from operations. The blended effective tax rate for the nine months ending September 30, 2020, and 2019, was 30.0% and 0.0%, respectively. The effective blended tax rate varies from our statutory U.S. tax rate due to the tax impact of the CARES Act, valuation allowances on losses and income generated in certain other jurisdictions at various tax rates.

Valuation Allowance

We record a deferred tax asset if we believe that it is more likely than not that we will realize a future tax benefit. Ultimate realization of any deferred tax asset is dependent on our ability to generate sufficient future taxable income in the appropriate tax jurisdiction before the expiration of carryforward periods, if any. Our assessment of deferred tax asset recoverability considers many different factors including historical and projected operating results, the reversal of existing deferred tax liabilities that provide a source of future taxable income, the impact of current tax planning strategies and the availability of future tax planning strategies. We establish a valuation allowance against any deferred tax asset for which we are unable to conclude that recoverability is more likely than not. This is inherently judgmental since we are required to assess many different factors and evaluate as much objective evidence as we can in reaching an overall conclusion. The particularly sensitive component of our evaluation is our projection of future operating results since this relies heavily on our estimates of future revenue and expense levels by tax jurisdiction.

In making our assessment of deferred tax asset recoverability, we considered our historical financial results, our projected future financial results, the planned reversal of existing deferred tax liabilities, and the impact of any tax planning actions. Based on our analysis we noted both positive and negative factors relative to our ability to support realization of certain deferred tax assets. However, based on the weighting of all the evidence, including the near term effect on our income projections of investments we are making in our team, product and systems infrastructure, we concluded that it was more likely than not that the majority of our deferred tax assets related to temporary differences and net operating losses may not be recovered. The establishment of a valuation allowance has no effect on our ability to use the underlying deferred tax assets to reduce cash tax payments in the future to the extent that we generate taxable income prior to expiration.

At September 30, 2020 and December 31, 2019, we established a valuation allowance of $7.08 million and $6.96 million, respectively, against certain deferred tax assets given the uncertainty of recoverability of these amounts.