5.    INCOME TAXES:

The Company generally utilizes the estimated annual effective tax rate method (“Estimated AETR Method”) prescribed under ASC 740-270, “Interim Reporting” to calculate the provision for income taxes. For the three months ended March 31, 2020, the Company recorded a benefit from income taxes of approximately $21.9 million on pre-tax loss from continuing operations of approximately $44.9 million utilizing the actual effective tax rate (“Discrete Method”) for the period. The Company utilized the Discrete Method because the Company’s tax rate is highly sensitive to small changes in projected pre-tax earnings under the Estimated AETR Method, which can result in a significant range of possible outcomes that deviate from the ordinary relationship between the tax provision and pre-tax income. The Company will re-evaluate the use of the Discrete Method in each future interim period until such time as when the ordinary relationship between the tax provision and pre-tax income normalizes.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act (the “2017 Tax Act”), and amongst other things, contains tax benefits designed to aid businesses impacted by COVID-19. The enactment of the CARES Act did not result in any material adjustments to the Company’s tax provision for the three months ended March 31, 2020.

During the three months ended March 31, 2020, the Internal Revenue Service (“IRS”) accepted the Company’s petition to extend the time to file certain procedural elections of a subsidiary corporation. The IRS acceptance resulted in a reduction of the valuation allowance against certain deferred tax assets (“DTAs”) for our net operating losses. As a result of the reduction of the valuation allowance, the Company recorded a tax benefit of approximately $12.5 million which is included in the  $21.9 million benefit from income taxes recorded for the three months ended March 31, 2020.

In accordance with ASC 740, “Accounting for Income Taxes”, the Company continues to evaluate the realizability of its net DTAs by assessing the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns, tax planning strategies, and future profitability. As of March 31, 2020, the Company believes it is more likely than not that these DTAs will be realized.  

The Company is subject to the continuous examination of our income tax returns by the IRS and other domestic tax authorities. We believe that an adequate provision has been made for any adjustments that may result from tax examinations. The Company does not currently anticipate that the total amounts of unrecognized tax benefits will significantly change within the next twelve months.