Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company had income tax expense of $16.4 million and $40.2 million in the third quarter and first nine months of 2023, respectively. The Company had income tax expense of $14.2 million and $39.2 million in the third quarter and first nine months of 2022, respectively. The Company’s effective tax rates were 23.4% and 24.7% for the third quarter and first nine months of 2023, respectively. The Company’s effective tax rates were 28.0% and 27.5% for the third quarter and first nine months of 2022, respectively. The increase in income tax expense in the third quarter and first nine months of 2023 was primarily due to higher income in both periods. The decrease in the effective tax rate in the third quarter and first nine months of 2023 was primarily due to higher federal tax credits for increasing research and development activities in 2023.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and instead requires taxpayers to capitalize and amortize such expenditures over five years. In 2022, our cash from operations decreased approximately $60 million and our net deferred tax assets increased by a similar amount as a result of this legislation. In 2023, we expect a negative impact on our cash from operations of approximately $31 million. The actual impact on 2023 cash from operations will depend on the amount of research and development costs we incur, on whether Congress modifies or repeals this provision, and on whether new guidance and interpretive rules are issued by the U.S. Treasury, among other factors.

On August 16, 2022, the President signed the Inflation Reduction Act of 2022 (the “IRA”) into law. We do not expect the tax-related provisions of the IRA, which are effective beginning in 2023, to have a material impact on our consolidated financial statements.