|3 Months Ended|
Mar. 31, 2020
NOTE 8—INCOME TAXES
The effective income tax expense (benefit) rate for continuing operations for the three months ended March 31, 2020 and 2019 was as follows:
The effective income tax rate differs from the statutory federal income tax rate of 21% primarily because of the partial valuation allowances recorded on the Company’s deferred tax assets.
For the three months ended March 31, 2020, the Company recorded income tax expense from continuing operations of less than $0.1 million, or (5.4%) of pretax loss from continuing operations compared with income tax expense from continuing operations of $0.1 million, or 13.9% of pretax income from continuing operations in the corresponding period in 2019. The decrease in income tax provision from continuing operations for the three months ended March 31, 2020, compared with the corresponding periods in 2019 was primarily the result of the $0.1 million decrease in indefinite-lived intangible deferred tax liabilities, partially offset by the increase in indefinitely-lived deferred tax assets related to the interest expense addback under Section 163 (j) of the Internal Revenue Code and the post-2017 US net operation loss.
As of March 31, 2020 and 2019, the Company would have needed to generate approximately $269.2 million and $277.8 million, respectively, of future financial taxable income in order to realize its deferred tax assets.
The Company’s foreign subsidiaries may generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in its operations outside of the U.S. pursuant to ASC 740-30. Undistributed earnings of foreign subsidiaries that are no longer permanently reinvested would become subject to deferred income taxes. As of March 31, 2020 and 2019, the Company did not have any undistributed earnings in its foreign subsidiaries because all of their earnings were either taxed as deemed dividends or included with the provisional estimate of a one-time transition tax as of December 31, 2017.
As of March 31, 2020 and 2019, the Company provided for a total liability of $2.8 million and $3.4 million, respectively, of which $1.8 million and $2.5 million, respectively, related to discontinued operations for unrecognized tax benefits related to various federal, foreign and state income tax matters, which were included in long-term deferred tax assets and other long-term liabilities. If recognized, the entire amount of liability would affect the effective tax rate. As of March 31, 2020, the Company accrued approximately $1.3 million, of which $0.8 million related to discontinued operations, in other long-term liabilities for potential payment of interest and penalties related to uncertain income tax positions.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The CARES Act did not have a material impact on the Company’s unaudited condensed consolidated financial condition or results of operations as of and for the three months ended March 31, 2020. However, the Company plans to defer the timing of federal estimated tax payments and employer payroll taxes as permitted by the CARES Act.
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