On March 27, 2020, President Trump signed into U.S. federal law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company has analyzed the different aspects of the CARES Act and implemented the applicable provisions, which had no material impact on the Company.

For interim reporting periods, the Company determines its tax expense by estimating an annual effective income tax rate based on current and forecasted business results and enacted tax laws on a quarterly basis and applies this tax rate to the Company’s ordinary income or loss to calculate its estimated tax expense or benefit. The tax effect of discrete items is recognized in the period in which they occur at the applicable statutory tax rate.

The income tax provision for VAALCO consists primarily of Gabonese and United States income taxes. The Company’s operations in other foreign jurisdictions have a 0% effective tax rate because the Company has incurred losses in those countries and has full valuation allowances against the corresponding net deferred tax assets.

Provision for income tax expense (benefit) related to income from continuing operations consists of the following:

The Company’s effective tax rate for the six months ended June 30, 2020 and 2019, excluding the impact of discrete items, was (56%) and 79%, respectively. For the three and six months ended June 30, 2020, the Company’s overall effective tax rate was impacted by non-deductible items associated with operations, the impact of deducting foreign taxes rather than crediting them, and a change in valuation allowance. The effective tax rate continued to be impacted by a change in current year expectations caused by lower crude oil prices. This impact was a result of the collapse in crude oil demand due in part to the world-wide economic impact of the COVID-19 pandemic. Primarily as a result of lower crude oil prices, the Company decreased its estimate for future taxable income. The total change in valuation allowances for the three and six months ended June 30, 2020 was $(4.1) million and $42.8 million, respectively.

The Company files income tax returns in all jurisdictions where such requirements exist, with Gabon and the United States being its primary tax jurisdictions.