Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

K. Income Taxes

The Company periodically undertakes a review of its valuation allowance and evaluates all positive and negative factors that may affect whether it is more likely than not that the Company would realize its future tax benefits from its deferred tax balances. In the quarter ended September 30, 2019, the Company also released substantially all the valuation allowance related to the Company’s U.S. deferred tax assets ($3.3 million).

The income tax provision for interim periods is generally determined based upon the expected effective income tax rate for the full year and the tax rate applicable to certain discrete transactions in the interim period. To determine the annual effective income tax rate, the Company must estimate both the total income (loss) before income tax for the full year and the jurisdictions in which that income (loss) is subject to tax. The actual effective income tax rate for the full year may differ from these estimates if income (loss) before income tax is greater than or less than what was estimated or if the allocation of income (loss) to jurisdictions in which it is taxed is different from the estimated allocations. In the quarter ended September 30, 2019, the Company also released substantially all the valuation allowance related to the Company’s U.S. deferred tax assets ($3.3 million).

The estimated annualized effective income tax rate for the nine months ended September 30, 2020 and September 30, 2019 was 20.9% and 24.8% (excluding impact of valuation reserve reversal), respectively. Differences between the Company’s effective income tax rate and the U.S. federal statutory rate are primarily the impact of state taxes, foreign taxes, non-deductible expenses, and excess tax benefits or expense on share-based compensation.