Income Taxes

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision (benefit) for income taxes consists of the following:

	Three Months Ended
	March 31, 2021		March 31, 2020
	(in thousands)
Current	$	(2,553)	$	6,143
Deferred	4,658		(167)
Income tax provision	$	2,105	$	5,976

The provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate before the provision for income taxes.

The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:

	Three Months Ended
	March 31, 2021		March 31, 2020
Federal statutory rate	21.0	%	21.0	%
State income taxes, net of Federal benefit	7.5		5.2
Excess tax benefits	(15.8)		(3.8)
Return to provision adjustments	(0.4)		—
Other	(0.9)		(0.9)
Effective tax rate	11.4	%	21.5	%

During the three months ended March 31, 2021, the Company recorded an excess tax benefit of $2.9 million as compared to $1.1 million during the same period in 2020, an increase of 173% The increase was primarily due to timing of stock option exercises as a result of our high stock price during the three months ended March 31, 2021.

We earn investment tax credits from the state of Oklahoma’s manufacturing property investment program. We use the flow-through method to account for investment tax credits earned on eligible tangible asset expenditures. Under this method, the investment tax credits are recognized as a reduction to our Oklahoma income tax expense in the year they are used. As of March 31, 2021, we have investment tax credit carryforwards of approximately $2.8 million. These credits have estimated expirations from the year 2036 through 2040.

The Company's estimated annual 2021 effective tax rate, excluding discrete events, is approximately 27%. We file income tax returns in the U.S., state and foreign income tax returns jurisdictions. We are subject to U.S. income tax examinations for tax years 2017 to present, and to non-U.S. income tax examinations for the tax years 2016 to present. In addition, we are subject to

state and local income tax examinations for the tax years 2016 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.

Coronavirus Aid, Relief, and Economic Security Act

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020, and includes a retroactive correction to the 2017 Tax Cuts and Jobs Act that allows for much faster depreciation of qualified improvement property that is placed in service after December 31, 2017. Under current rules, the calculation of depreciation or repair deductions for prior years can be recomputed and a one-time catch-up adjustment is allowed in the current tax year for missed deductions. The adjustment is the difference between depreciation or repair deductions claimed versus depreciation or repair deductions that could have been claimed by the end of the prior tax year and does not require amending any prior year tax returns. The Company completed the prior year adjustment and the current-year catch up with the 2019 tax return as filed in the fourth quarter of 2020 resulting in a increase to our deferred tax liability of $4.7 million. For tax years 2020 and forward, the Company includes this treatment for our qualified property placed in service.

American Rescue Plan Act

On March 11, 2021, the American Rescue Plan Act (the “ARM”) was enacted and signed into law. The ARM is an economic stimulus package in response to the COVID-19 pandemic, which contains tax provisions that are not expected to have a material impact to our consolidated financial statements. In accordance with accounting standards for income taxes, the impact of this new tax legislation was taken into account in our first quarter of 2021, the period in which it was enacted.