Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recognized an income tax benefit of $6.6 million and $11.8 million during the three and nine months ended September 30, 2020, respectively. In comparison, the Company recognized an income tax benefit of $0.7 million and income tax expense of $2.8 million during the three and nine months ended September 30, 2019, respectively.

The Company calculates its (benefit from) provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pretax book income or loss. The effective tax rate (income taxes as a percentage of income before income taxes) was (118.8)% and 51.5% for the three and nine months ended September 30, 2020, respectively. In comparison, the effective tax rate was 30.4% and 29.0% for the three and nine months ended September 30, 2019, respectively.

The Company’s effective income tax rate can vary from period to period depending on, among other factors, the business mix of the Company's earnings; the amount of permanent tax adjustments and discrete items. In the third quarter of 2020, the Company filed its federal and state income tax returns and identified certain favorable return-to-provision adjustments, primarily the deductibility of employee and officer compensations costs and transaction costs, following the engagement of specialized tax technical expertise resulting in a change in estimate relative to the Company's best estimate used in the preparation of the 2019 income tax provision. The Company recorded this change in estimate and related income tax benefit of $8 million in the three and nine months ended September 30, 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law and authorizes more than $2 trillion to battle COVID-19 and its economic effects, including immediate cash relief for individual citizens, loan programs for small business, support for hospitals and other medical providers, and various types of economic relief for impacted businesses and industries. The Company believes it is eligible for certain credits of the relief programs under the CARES Act and is in the process of gathering the required information. The Company will continue to monitor the situation and evaluate any additional future legislation.