We believe that our recorded deferred tax assets and liabilities are reasonable. However, tax laws and regulations are subject to interpretation, and the outcomes of tax disputes are inherently uncertain; therefore, our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions.

For the three-month period ended March 31, 2021, our estimated annual effective tax rate, adjusted for discrete tax items, is applied to our pre-tax loss as we have determined that the use of the annual effective tax rate method is appropriate. We used the discrete effective tax rate method for recording income taxes for the three-month period ended March 31, 2020. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it were the annual period and determines the income tax expense or benefit on that basis. For the three-month period ended March 31, 2020, we believed using the discrete method was more appropriate than the annual effective tax rate method because of the high degree of uncertainty in estimating annual pretax earnings created at the time by uncertainty in future market conditions caused by the ongoing COVID-19 pandemic as well as uncertainty in the oil and gas market.

The U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, is an economic stimulus package designed to aid in offsetting the economic damage caused by the ongoing COVID-19 pandemic and includes various changes to U.S. income tax regulations. The CARES Act permits the carryback of certain net operating losses, which previously had been required to be carried forward, at the tax rates applicable in the relevant carryback year. As a result of these changes, in the three-month period ended March 31, 2020 we recognized an estimated $5.8 million net tax benefit, consisting of a $15.9 million current tax benefit and a $10.1 million deferred tax expense. This $5.8 million net tax benefit resulted from our deferred tax assets related to our net operating losses in the U.S. being utilized at the previous higher income tax rate applicable to the carryback periods.

During the three-month period ended March 31, 2020, we migrated two of our foreign subsidiaries into our U.S. consolidated tax group. Subsequent to the migration, these subsidiaries are disregarded and no longer subject to certain branch profits taxes. Consequently, we recognized net deferred tax benefits of $8.3 million due to the reduction in the overall tax rate associated with these subsidiaries.

Income taxes are provided at the U.S. statutory rate and at the local statutory rate for each foreign jurisdiction and adjusted for items that are permanent differences for Federal and foreign income tax reporting purposes, but not for book purposes. The effective tax rates for the three-month periods ended March 31, 2021 and 2020 were (4.0)% and 60.2%, respectively. The variance was primarily attributable to the earnings mix between our higher and lower tax rate jurisdictions as well as our carrying back certain net operating losses to prior periods with higher income tax rates. The effective tax rate for the three-month period ended March 31, 2021 was significantly lower than the U.S. statutory rate primarily due to non-creditable foreign taxes and offset in part by a significant portion of our current period earnings being generated in certain jurisdictions with a lower tax rate. The combination of these offsetting factors resulted in an overall tax provision and a negative tax rate for the quarter. The effective tax rate for the three-month period ended March 31, 2020 was significantly higher than the U.S. statutory rate primarily due to our recognition of discrete benefits during the period related to the restructuring of certain foreign subsidiaries and our carrying back certain net operating losses to prior periods with higher income tax rates under tax law changes associated with the CARES Act whereas we had only nominal pre-tax losses.

The primary differences between the income tax provision (benefit) at the U.S. statutory rate and our actual income tax provision (benefit) are as follows (dollars in thousands):

(1)	The negative effective tax rate for the three-month period ended March 31, 2021 is due to the tax benefits associated with our nominal pretax loss being smaller than our non-creditable foreign taxes.