Quarterly report pursuant to Section 13 or 15(d)

INCOME TAXES

v3.22.2.2
INCOME TAXES
 6 Months Ended
Jun. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES
 14. INCOME TAXES
The following table summarizes the Company’s income tax expense and effective tax rates for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Income (Loss) Before Income Taxes $ 19,776  $ 9,004  $ 5,070  $ (13,735)
Income Tax Expense $ 7,710  $ 6,368  $ 12,761  $ 14,679 
Effective Tax Rate 39  % 71  % 252  % (107) %
The Company has computed its provision for income taxes based on the actual effective rate for the quarter as the Company believes this is the best estimate for the annual effective tax rate.
Due to its cannabis operations, the Company is subject to the limitation of U.S. Internal Revenue Code of 1986, as amended ("IRC") Section 280E under which the Company is only allowed to deduct "costs of goods sold". This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E. Therefore, the effective tax rate can be highly variable and may not necessarily correlate with pre-tax income which provides for effective tax rates that are well in excess of statutory tax rates.
The Company’s tax returns benefited from not applying IRC Section 280E to certain entities of the consolidated group either due to the entity not yet starting operations or because the entity had a separate trade or business that was not medical or recreational cannabis operations. The Company determined that it is not more likely than not these tax positions would be sustained under examination.
As a result, the Company has an uncertain tax liability of $46,459 and $41,990 as of June 30, 2022 and December 31, 2021, respectively, inclusive of interest and penalties, which is included in income tax liabilities - non-current in the consolidated balance sheets.