|3 Months Ended|
Mar. 31, 2020
7. Income Taxes
The Company recorded a provision for income taxes of $0 for the three months ended March 31, 2020 and $6,000 for the three months ended March 31, 2019. The provision for income taxes recorded for the three months ended 2019 was primarily due to state income tax expense.
The Company’s effective tax rate was 0.0% for the three months ended March 31, 2020 and (0.2)% for the three months ended March 31, 2019. The difference between the effective tax rate and the federal statutory tax rate for the three months ended March 31, 2020 and 2019 primarily relates to the valuation allowance on the Company’s deferred tax assets.
For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes. The Company also computes the tax provision or benefit related to items reported separately and recognizes the items net of their related tax effect in the interim periods in which they occur. The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.
As of March 31, 2020 and December 31, 2019, the Company retains a full valuation allowance on its deferred tax assets. The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods. The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income.
The provision for income taxes for the three months ended March 31, 2020 and 2019 was calculated on a jurisdiction basis.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law. The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company is currently analyzing the impact of these changes and therefore an estimate of the impact to income taxes is not yet available.
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