Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

(Benefit) provision for income taxes is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
	(In Thousands)
Current:
Federal	$	—		$	—		$	—		$	—
State		(396	)		170			739			1,067
Total Current	$	(396	)	$	170		$	739		$	1,067
Deferred:
Federal	$	(2,955	)	$	1,557		$	8,139		$	32,236
State		(1,898	)		(947	)		(5,256	)		(1,026	)
Total Deferred	$	(4,853	)	$	610		$	2,883		$	31,210
(Benefit) provision for income taxes	$	(5,249	)	$	780		$	3,622		$	32,277

The tax provision for the nine months ended September 30, 2023, was $3.6 million (9.8% provision on pre-tax income). The tax provision for the nine months ended September 30, 2022, was $32.3 million (16.4% provision on pre-tax income). For 2023, the effective tax rate is lower than the statutory tax rate primarily due to deferred benefits from state tax law changes, partially offset by state taxes. For 2022, the effective tax rate was less than the statutory tax rate primarily due to the impact of the valuation allowances.

We considered both positive and negative evidence in our determination of the need for valuation allowances for deferred tax assets. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of financing activities and our quarterly results. Based on our analysis, we have determined that it is more-likely-than-not that all of our federal deferred tax assets and a portion of our state deferred tax assets will be utilized. We estimate an approximately $1.3 million increase in the related valuation allowance associated with these state deferred tax assets will be recorded during the year as part of the estimated annual effective tax rate applied to ordinary income.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

LSB and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2019-2022 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other major tax jurisdictions. Additionally, the 2013-2018 years remain subject to examination for determining the amount of net operating loss and other carryforwards.