Quarterly report [Sections 13 or 15(d)]

Income Taxes

v3.25.2
Income Taxes
 6 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company has historically calculated the provision for U.S. income taxes during interim reporting periods by applying the annual effective tax rate (“AETR”) method generally required by ASC 740-270. For the second quarter of 2025, the Company determined that the continued application of the AETR method was not reliable because sensitivity from nominal changes to projected pre-tax earnings can result in significant variability in the AETR. Consequently, the Company calculated its income taxes based on the actual year-to-date loss and concluded that this method (the “discrete method”), as allowed by ASC 740-270-30-18, is more appropriate than the AETR method for the three and six months ended June 30, 2025. Under the discrete method, the Company calculated its U.S. income tax benefit as though the interim year-to-date period was an annual period.
As a result of the change from the AETR method to the discrete method, the Company recognized a provision for income taxes of $7.3 million during the three months ended June 30, 2025, effectively reversing a significant portion of the income tax benefit of $9.5 million accrued during the three months ended March 31, 2025. The Company recognized a provision for income taxes of $2.1 million during the three months ended June 30, 2024. The effective income tax rate for the three months ended June 30, 2025 was (194.5)% under the discrete method, compared with (61.1)% for the same period in 2024 under the AETR method.
The benefit for income taxes was $2.2 million for the six months ended June 30, 2025, compared to $2.6 million in the same period in 2024. The effective income tax rate for the six months ended June 30, 2025 was 12.5% under the discrete method, compared with 14.6% for the same period in 2024 under the AETR method. For both the six months ended June 30, 2025 and 2024, the effective tax rate differs from the 21% federal statutory tax rate primarily due to non-deductible items and state income taxes.