|6 Months Ended|
Jun. 30, 2020
|Income Tax Disclosure [Abstract]|
The Company is taxed as a C corporation.
For interim periods, the provision for income taxes (including federal, state, local and foreign taxes) is calculated based on the estimated annual effective tax rate, adjusted for certain discrete items for the full fiscal year. Cumulative adjustments to the Company's estimate are recorded in the interim period in which a change in the estimated annual effective rate is determined. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. The provision (benefit) for income taxes consist of the following:
No valuation allowance was required as of June 30, 2020 or December 31, 2019.
The Company has recorded a liability for unrecognized tax benefits of $0.5 million and $0.4 million as of June 30, 2020 and December 31, 2019, respectively, which were included in accrued expenses and other current liabilities. These unrecognized tax benefits are related to tax positions taken on its various income tax returns in open tax periods.
The effective tax rate for the three and six months ended June 30, 2020 was 27.4% and 14.1%, respectively, and the effective tax rate for the three and six months ended June 30, 2019 was (26.9%) and 31.8%, respectively. The difference in the effective rate for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 is primarily due to the CARES Act allowing the Company to carryback net operating losses (“NOLs”) generated in 2018 and 2019 (originally valued at a 21% federal tax rate) to prior years and generate a tax refund based on the higher 34% federal tax rate in those prior years.
On March 27, 2020, the CARES Act was signed into law making several changes to the Internal Revenue Code. The CARES Act, among other things, permits NOL carryovers to offset 100% of taxable income for tax years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding years to generate a $1.6 million refund of previously paid income taxes. The CARES Act contains modification on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. The CARES Act also accelerates the refund of AMT credits that were previously accumulated.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef