|6 Months Ended|
Jun. 30, 2022
|Income Tax Disclosure [Abstract]|
Note L – Income Taxes
A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense is as follows:
The effective tax rate for the six months ended June 30, 2022 differs from the U.S. federal income tax rate of 21.0% primarily due to nondeductible compensation costs on the Class P Unit Incentive plan, the valuation of warrants, goodwill impairments, and a partial valuation allowance on the realization of the deferred tax assets. The effective tax rate for the six months ended June 30, 2021 differs from the U.S. federal income tax rate of 21.0% primarily due to nondeductible transaction costs, contingent earnout payments from the MIS acquisition, and changes in the estimated state income tax rate in connection with the acquisition of Oakman and DPSS, partially offset by the estimated research and development income tax credit.
The Company assesses the deferred tax assets for recoverability on a quarterly basis. In assessing the realizability of deferred income tax assets, the Company considers whether it is more-likely-than-not that some or all of the deferred income tax assets will not be realized. The ultimate realization of the deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (“NOL”) carryforwards are available. For the six months ended June 30, 2022, the Company concluded that a portion of its deferred tax assets would more-likely-than-not be realized, whereas the Company concluded that substantially all of the deferred tax assets are more-likely-than-not realizable for the three months ended June 30, 2021. The change from the three months ended June 30, 2021 to the three months ended June 30, 2022 was driven by the additional amount of deferred tax assets expected to be generated on taxable losses in 2022, which resulted in an increase to the valuation allowance of
$1.8 million recognized through income tax expense (benefit) on the condensed consolidated statements of operations and comprehensive income (loss).
The effective tax rate was 4.9% compared to 9.2% for the six months ended June 30, 2022 and June 30, 2021, respectively. The difference in effective tax rate between periods was primarily related to the goodwill impairments and valuation of warrants during the six months ended June 30, 2022.
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://www.xbrl.org/2003/role/disclosureRef