|6 Months Ended|
Jun. 30, 2021
7. Income Taxes
The Company recorded a provision for income taxes of $2,000 and $3,000 for the three and six months ended June 30, 2021 and 2020, respectively.
The Company’s effective tax rate was (0.03%) and (0.05%) for the six months ended June 30, 2021 and 2020, respectively. The difference between the effective tax rate and the federal statutory tax rate for the six months ended June 30, 2021 and 2020 primarily relates to the valuation allowance on the Company’s deferred tax assets.
7. Income Taxes, continued
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 June 30, 2021 and December 31, 2020, 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 six months ended June 30, 2021 and 2020 was calculated on a jurisdiction basis.
On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property. On December 21, 2020, the U.S. Congress passed the Consolidation Appropriations Act, 2021 (the “CAA Act”). The tax provisions under the CARES Act and CAA Act, do not have a material impact on the condensed consolidated financial statements for the six months ended June 30, 2021, given the existence of a full valuation allowance.
On June 29, 2020, California Assembly Bill 85 (“AB 85”) was signed into law, which suspends the use of California net operating losses and limits the use of California research tax credits for tax years beginning in 2020 and before 2023. The Company does not expect the suspension of net operating losses to have a significant impact on the condensed consolidated financial statements.
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