Income Taxes

9 Months Ended

Sep. 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 then 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 September 30, 2022 and 2021 was $0.2 million and $5.2 million, respectively. The provision for income taxes for the nine months ended September 30, 2022 and 2021 was $11.8 million and $14.1 million, respectively. The decrease was primarily attributable to the year-over-year change in the geographical distribution of income and Brazilian foreign exchange tax impacts of $(6.3) million and $(6.8) million for the three and nine months ended September 30, 2022, respectively. This decrease was partially offset by an increase in U.S. income tax incurred at the corporate level since beginning in April 2022 of $0.1 million and $1.6 million for the three and nine months ended September 30, 2022, respectively.

The effective tax rate for the three months ended September 30, 2022 and 2021 was 0.6% and 79.2%, respectively. The effective tax rate for the nine months ended September 30, 2022 and 2021 was 20.3% and 24.7%, respectively. The decrease was primarily driven by the geographical distribution of income and the varying tax regimes of jurisdictions. Brazilian foreign exchange tax impacts decreased our effective tax rate by (16.7)% and (11.8)% for the three and nine months ended September 30, 2022, respectively. Our effective tax rate was also impacted 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 5.6% for the nine months ended September 30, 2022. Additionally, our effective tax rate was impacted by 0.3% and 2.8% for the three and nine months ended

September 30, 2022, respectively, due to additional tax recorded since being subject to U.S. income taxes at the corporate level beginning in April 2022.

Excelerate is 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 and foreign exchange impacts as well as varying tax regimes of jurisdictions. 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.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into U.S. law. Under this law, there is a new 15% corporate minimum tax, which will not have an impact on the Company. In addition, beginning after December 31, 2022, there will be a 1% excise tax on certain share repurchases, which is not expected to have a material impact on the Company’s Consolidated Financial Statements. There are other parts of this new law that the Company is evaluating, but none are expected to have a material impact on the Company’s Consolidated Financial Statements.