Forecasting NOLs with additional "CARES Act" due to Covid-19

Hi WSO people,

I am facing an issue reconciling the income tax benefit for Nautilus INC in 2020. Currently, the effective tax rate is 301.2% and I do not understand the reason why. I understand new NOLs and hence, DTAs will be added to 1Q 2020.

Hence, should I be looking at past annual reports to dig out the net income from 2017 to 2020 and add back the NOLs from those years to 2020. Would anyone have some clarification on this? Thank you so much for your help!

Background: Nautilus is a money-losing company that retails gym equipment.

CARES Act: Recently, the "CARES Act" was enacted in response to COVID, which included significant provisions that could ipact corporate taxpayers' accounting for income taxes. The CARES Act amended the NOL rules suspending the 80% limitation on the utilization of NOLs generated after December 31, 2017 and before January 1, 2021. Additionally the CARES Act allows corporate NOLs arising in taxable years beginning after December 31, 2017 and before January 1, 2021, to be carried back to each of the five taxable years preceding the taxable year of the loss.

1Q Report from Nautilus INC: Pg 4 of Nautilus Inc 10-Q May 7 2020 Report 2020 2019 Net sales $ 93,722 $ 84,400 Cost of sales 58,125 48,558 Gross profit 35,597 35,842 Operating expenses: Selling and marketing 24,686 34,043 General and administrative 7,656 7,655 Research and development 3,815 4,311 Total operating expenses 36,157 46,009 Operating loss (560) (10,167) Other expense: Interest income 2 165 Interest expense (627) (205) Other, net 41 (393) Total other expense, net (584) (433) Loss from continuing operations before income taxes (1,144) (10,600) Income tax benefit (3,446) (2,116) Income (loss) from continuing operations 2,302 (8,484)

Pg 26 of Nautilus Inc Report Income Tax Benefit Income tax provision includes U.S. and international income taxes, and interest and penalties on uncertain tax positions. Dollars in thousands Three Months Ended March 31, Change 2020 2019 $ % Income tax benefit $(3,446) $(2,116) $(1,330) 62.9% Effective tax rate 301.2% 20.0%

The income tax benefit and effective tax rate from continuing operations for the three month period ended March 31, 2020 was primarily due to the 14% rate benefit of net operating loss carry- back from the 2019 tax year to the 2016 tax year as a result of CARES Act enactment, which is discretely recognized in the first quarter of 2020. The effective tax rate and income tax benefit from continuing operations for the three month period ended March 31, 2019 was primarily due to our losses generated in the U.S.