Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income taxes

17.Income taxes

In computing the provision for income taxes for interim periods, the Company estimates the annual effective tax rate for the full year which is applied to the actual year-to-date ordinary income (loss) and reflects the tax effects of discrete items in its provision for income taxes as they occur.

The provision for income taxes for the three months ended June 30, 2022 and June 30, 2021 was $7.8 million and $4.4 million, respectively. The provision for income taxes for the six months ended June 30, 2022 and June 30, 2021 was $11.5 million and $8.9 million, respectively. The increase was primarily attributable to U.S. income taxes incurred at the corporate level beginning in April 2022 and the year-over-year change in the geographical mix of pre-tax book income.

The effective tax rate for the three months ended June 30, 2022 and June 30, 2021 was 204.7% and 55.1%, respectively. The effective tax rate for the six months ended June 30, 2022 and June 30, 2021 was 56.5% and 17.6%, respectively. The increase was primarily driven by the reduction of income before tax due to the loss on early extinguishment of the lease liability on acquisition of the Excellence vessel without a corresponding tax benefit which increased our effective tax rate by 174.3% and 29.2% for the three and six months ended June 30, 2022, respectively. Our effective tax rate was also impacted by 39.8% and 7.5% for the three and six months ended June 30, 2022, respectively, due to being subject to U.S. income taxes incurred at the corporate level beginning April 2022.

We are a corporation for U.S. federal and state income tax purposes. Excelerate’s accounting predecessor, EELP, is treated as a pass-through entity for U.S. federal income tax purposes and, as such, has generally not been subject to U.S. federal income tax at the entity level. Accordingly, unless otherwise specified, our historical results of operations prior to the IPO do not include any provision for U.S. federal income tax for EELP.

The Company has international operations that are also subject to foreign income tax and U.S. corporate subsidiaries subject to U.S. federal tax. 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.