Income taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income taxes

NOTE 9 — Income taxes

The following table outlines our pre-tax net income (loss) and income tax amounts:

	Three months ended September 30,					Nine months ended September 30,
In thousands	2021			2020		2021			2020
Income (loss) before income taxes	$	17,529		$	(28,350)	$	(101,880)		$	(572,085)
Provision (benefit) for income taxes	2,984			3,098		11,567			(22,200)
Effective tax rate	17.0		%	***		(11.4)		%	3.9		%

*** Indicates an absolute value percentage change greater than 100.

The provision for income taxes for the three months ended September 30, 2021 was mainly driven by pre-tax income and is impacted by forgiveness of PPP loans during the quarter. For federal tax purposes, book income from forgiven loans is not included in taxable income, and expenses paid utilizing the loan proceeds can be deducted. The impact of PPP loan forgiveness is partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards. The provision was calculated using the estimated annual effective tax rate of 77.7%. The annual effective tax rate is principally impacted by the derivative revaluation, which is non-deductible for federal tax purposes, and the creation of valuation allowances on non-deductible interest expense carryforwards. The estimated annual effective tax rate is based on a projected tax expense for the full year.

The tax provision for the nine months ended September 30, 2021 was mainly driven by the pre-tax net loss generated during the first quarter of 2021. The tax provision is impacted by the derivative revaluation, which is nondeductible for federal tax purposes, the creation of valuation allowances on non-deductible interest expense carryforwards, and PPP loan forgiveness, in combination with state income tax and foreign tax expense.

During the nine months ended September 30, 2021, we reclassified $32.5 million (tax effected) in connection with the retirement of the deferred tax asset related to the embedded conversion feature associated with the Company’s 2027 Notes. The retirement of the deferred tax asset resulted from the reclassification of the embedded conversion feature from a derivative liability to Equity as a reduction to Additional paid-in-capital during the first quarter of 2021. See Note 7 - Debt for additional information about the Company's 2027 Notes.

The total amount of unrecognized tax benefits that, if recognized, may impact the effective tax rate was approximately $42.8 million as of September 30, 2021 and $39.5 million as of December 31, 2020. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $3.4 million as of September 30, 2021 and $2.6 million as of December 31, 2020.

It is reasonably possible that further adjustments to our unrecognized tax benefits may be made within the next twelve months due to audit settlements and regulatory interpretations of existing tax laws. At this time, an estimate of potential change to the amount of unrecognized tax benefits cannot be made.

The provision for income taxes for the three months ended September 30, 2020 was mainly impacted by a reduction in the year to date tax benefit as a result of a lower projected annualized effective tax rate. The provision for income taxes for the three months ended September 30, 2020 was calculated using the estimated annual effective tax rate of 6.2%. The estimated annual effective tax rate is based on a projected tax benefit for the full year. The tax benefit for the nine months ended September 30, 2020 is lower than the 21% statutory federal rate due to the impact of non-deductible asset impairments, non-deductible officers’ compensation and the creation of valuation allowances on non-deductible interest expense carryforwards and capital losses.