Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income taxes

14.Income taxes

The Company estimates the annual effective tax rate for the full year to be applied to the actual year-to-date ordinary income (loss) and reports the tax effects of discrete items as they occur.

The tax provision for the three months ended March 31, 2022 and March 31, 2021 was $3.7 million and $4.5 million, respectively. The decrease in the tax provision for the three months ended March 31, 2022 was primarily attributable to the year over year change in the geographical mix of pretax book income.

The effective tax rate for the three months ended March 31, 2022 and March 31, 2021 was 22.5% and 10.6%, respectively. The increase in the tax provision for the three months ended March 31, 2022 was driven by the change in geographical mix of pretax book income in certain taxable entities and jurisdictions as well as withholding tax accruals.

The effective tax rates for the three months ended March 31, 2022 and March 31, 2021 differ from the U.S. federal statutory rate of 21% primarily due to the Company’s election to be treated as a pass-through entity for income tax purposes and, as such, is not subject to U.S. federal and most state income taxes. Instead, the Company’s U.S. income tax activity is allocated to individuals and entities affiliated with the Company. The Company also has international operations that are subject to foreign income tax requirements. Therefore, our effective income tax rate is dependent on many factors, including the Company’s geographical distribution of income, a rate benefit attributable to the portion of the Company’s earnings not subject to corporate level taxes, and the impact of nondeductible items. In one jurisdiction, the Company’s tax rate is significantly less than the applicable statutory rate as a result of a tax holiday that was granted. This tax holiday will expire in 2033 at the same time that our contract and revenue with our customer ends.