Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes In determining the quarterly provisions for income taxes, the Company historically used an estimated annual effective tax rate, which is generally based on our expected annual income and statutory tax rates in the U.S., Canada, and the UK. We determined that since small changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate of income taxes in the second quarter of 2026. For the six months ended June 30, 2026, the Company calculated its interim tax provision using the discrete effective tax rate method. Under this method, the year-to-date period is treated as the annual period, and income tax expense or benefit is determined accordingly. The discrete method is used when small changes in estimated pre-tax book income could significantly affect the estimated annual effective tax rate, resulting in an unreliable estimate of income taxes. For the three months ended June 30, 2026 and 2025, the Company reported effective income tax rates of 15% and 33%, respectively. The decrease was primarily attributable to the operating loss generated in the current quarter and increase in interest expense related to uncertain tax positions. For the six months ended June 30, 2026 and 2025, the Company reported effective income tax rates of 59% and 29%, respectively. The increase was primarily due to a decrease in operating profit for the six months ended June 30, 2026 and increase in interest expense related to uncertain tax positions. As of June 30, 2026, the Company is permanently reinvested in certain of its non-U.S. subsidiaries and does not have a deferred tax liability related to its undistributed foreign earnings. The estimated amount of the unrecognized deferred tax liability attributed to future withholding taxes on dividend distributions of undistributed earnings for certain non-U.S. subsidiaries, which the Company intends to reinvest the related earnings indefinitely in its operations outside the U.S., is approximately $1 million. The Company maintains a reserve for potential liabilities for uncertain tax positions. As of June 30, 2026, the Company had approximately $23.9 million in total unrecognized tax benefits, of which up to $16.6 million would favorably affect the Company’s reported income if realized and recognized. The Company’s policy is to include provisions for interest and penalties related to uncertain and unrecognized tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income tax provision in the period that such determination is made. As of June 30, 2026 and December 31, 2025, the Company had approximately $1.8 million and $1.6 million in accrued interest, respectively. The Company files income tax returns in the U.S. federal jurisdiction, various U.S. states and foreign jurisdictions. The Company is subject to U.S. federal and certain state tax examinations for certain years after 2021 and forward and is subject to California tax examinations for years after 2020. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. This legislation includes changes to U.S. federal tax law, which may be subject to further clarification and the issuance of interpretive guidance. We have assessed the legislation and its effect on our consolidated financial statements. The enactment of the OBBBA Act did not have a material impact during the six months ended June 30, 2026. We will continue to monitor any future guidance or legislative developments related to the OBBBA Act to assess its potential implications on our tax position.
|