Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

For the three months ended September 30, 2020, we had income tax expense of $2.2 million on a pre-tax loss of $40.2 million, primarily due to the nondeductible goodwill impairment loss of $66.2 million recorded during the third quarter of 2020. For the three months ended September 30, 2019, we had an effective income tax rate of 25.1%. 

For the nine months ended September 30, 2020 and 2019, we had an effective tax benefit rate of 3.1% and an effective income tax rate of 33.4%, respectively. For the nine months ended September 30, 2020, our effective tax benefit rate was lower than our statutory benefit rate primarily due to the nondeductible goodwill impairment losses of $119.5 million and $66.2 million recorded during the first and third quarters, respectively.  For the nine months ended September 30, 2019, our effective income tax rate was higher than our statutory tax rate due to nondeductible expenses related to the acquisition of Nutrisystem as well as two adjustments related to the acquisition that collectively increased our income tax expense for such period by approximately $2.7 million: (i) we evaluated the realizability of beginning-of-the-year deferred tax assets and increased the valuation allowance on deferred tax assets related to state net operating loss carryforwards by $1.8 million, and (ii) we recorded a $0.9 million reduction in deferred tax assets related to state income tax credits.

We file income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions.  Tax years remaining subject to examination in the U.S. Federal jurisdiction include 2017 to present.