Income Taxes

9 Months Ended

Sep. 30, 2020

INCOME TAXES

The Company’s effective income tax rate is based on expected income, statutory rates, valuation allowances against deferred tax assets, and any tax planning opportunities available to the Company. For interim financial reporting, the Company estimates the annual effective income tax rate based on full year projections and applies the annual effective income tax rate against year-to-date pretax income to record income tax expense, adjusted for discrete items, if any. The Company refines annual estimates as new information becomes available. The Company’s tax rate does not bear a relationship to statutory tax rates due to permanent differences, which are primarily related to nondeductible compensation, and state taxes.

The Company’s income tax expense consisted of the following:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Income before provision for income taxes	$	55,962	$	49,744	$	88,443	$	128,292
Income tax expense using estimated annual effective income tax rate	16,784		14,844		26,497		38,378
Changes in effective tax rates	66		(785)		—		—



Impact of discrete items, net	973		(323)		1,264		(434)




Income tax expense	$	17,823	$	13,736	$	27,761	$	37,944

The discrete items for the three months ended September 30, 2020 relate to income tax expense related to changes in value of certain contingent consideration and stock-based compensation. The discrete items for the nine months ended September 30, 2020 relate to income tax expense related to the equity in earnings from investments associated with the one-time gain on sale of LTS partially offset by the goodwill and trademark impairment charges, changes in value of certain contingent consideration, and stock-based compensation. The discrete items for the three and nine months ended September 30, 2019 are related to the release of certain valuation allowances offset by income tax expense related to state tax audits and stock-based compensation.

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law. The Act includes several significant tax and payroll-related provisions for corporations, including the usage of net operating losses, bonus depreciation, interest expense, and certain payroll benefits. The Company continues to evaluate the impact this Act will have on its financial statements and required disclosures.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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