The Company is taxed as a corporation for income tax purposes and is subject to federal, state, and local taxes with respect to its allocable share of any net taxable income from RSG LLC. RSG LLC is a limited liability company taxed as a partnership for income tax purposes, and its taxable income or loss is passed through to its members, including the Company. RSG LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, and on the taxable income of its U.S. corporate subsidiary. For the periods presented prior to the Organizational Transactions and IPO, the reported income taxes represent those of RSG LLC.

The Company’s effective tax rate from continuing operations was 14.14% and 21.31% for the three months ended September 30, 2021 and 2020, respectively. The Company’s effective tax rate from continuing operations was (3.06)% and 7.60% for the nine months ended September 30, 2021 and 2020, respectively. The quarterly effective tax rates are significantly different from the 21% statutory tax rate primarily because the Company was taxed as an LLC pre-IPO and is not liable for income taxes on the portion of earnings that is attributable to the non-controlling interest in the post-IPO period.

The Company does not believe it has any significant uncertain tax positions and therefore has no unrecognized tax benefits as of September 30, 2021, that if recognized, would affect the annual effective tax rate.

Deferred Taxes

The Company reported Deferred tax assets of $395.8 million as of September 30, 2021 and Deferred tax liabilities of $0.4 million and $0.6 million as of September 30, 2021 and December 31, 2020, respectively, on the Consolidated Balance Sheets. The increase in Deferred tax assets relates primarily to the basis difference in the Company’s investment in RSG LLC, which arose as a result of the Organizational Transactions and the IPO. The components of the increase include $234.0 million related to benefits from future deductions attributable to the TRA, $95.0 million related benefits from future deductions attributable to TRA Alternative Payments and purchase of LLC Common Units from certain holders who received TRA Alternative Payments, and $61.1 million related to temporary differences in the book basis as compared to the tax basis.

As of September 30, 2021, the Company concluded that, based on the weight of all available positive and negative evidence, the Deferred tax assets with respect to the Company’s basis difference in its investment in RSG LLC are more likely than not to be realized. As such, no valuation allowance has been recognized against that basis difference.

Tax Receivable Agreement (TRA)

In connection with the Organizational Transactions and IPO, the Company entered into a TRA with certain pre-IPO LLC Unitholders whereby the Company agreed to pay to such LLC Unitholders 85% of the benefits that the Company realizes from increases in the tax basis of the assets of RSG LLC resulting from purchases or exchanges of LLC Common Units, tax amortization deductions attributable to asset acquisitions that closed prior to the IPO, and certain tax benefits attributable to payments that the Company is required to make under the TRA. The amounts payable under the TRA will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of the Company in the future.

Based on current projections, the Company anticipates having sufficient taxable income to be able to realize the benefits and has recorded Tax receivable agreement liabilities of $282.5 million related to these benefits on the Consolidated Balance Sheets as of September 30, 2021.