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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

19. Income Taxes

We and our principal domestic subsidiaries are included in a consolidated U.S. federal income tax return. Our international subsidiaries file various income tax returns in their jurisdictions. Significant components of earnings before income taxes and the provision for income taxes are as follows (in millions):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Earnings before income taxes:

 

 

 

 

 

 

 

 

 

United States

 

$

781.6

 

 

$

593.0

 

 

$

524.4

 

 

 

 

 

 

 

 

 

 

 

Foreign, principally Australia, Canada, New Zealand
   and the U.K.

 

 

545.4

 

 

 

382.1

 

 

 

346.5

 

Total earnings before income taxes

 

$

1,327.0

 

 

$

975.1

 

 

$

870.9

 

Provision for income taxes:

 

 

 

 

 

 

 

 

 

Federal:

 

 

 

 

 

 

 

 

 

Current

 

$

109.1

 

 

$

44.6

 

 

$

43.6

 

Deferred

 

 

(3.5

)

 

 

(151.6

)

 

 

(112.4

)

 

 

 

105.6

 

 

 

(107.0

)

 

 

(68.8

)

State and local:

 

 

 

 

 

 

 

 

 

Current

 

 

114.3

 

 

 

50.6

 

 

 

36.6

 

Deferred

 

 

(83.5

)

 

 

(11.6

)

 

 

(19.3

)

 

 

 

30.8

 

 

 

39.0

 

 

 

17.3

 

Foreign:

 

 

 

 

 

 

 

 

 

Current

 

 

196.6

 

 

 

108.8

 

 

 

94.6

 

Deferred

 

 

(122.0

)

 

 

(20.7

)

 

 

(30.3

)

 

 

 

74.6

 

 

 

88.1

 

 

 

64.3

 

Total provision for income taxes

 

$

211.0

 

 

$

20.1

 

 

$

12.8

 

 

A reconciliation of the provision for income taxes with the U.S. federal statutory income tax rate is as follows (in millions, except percentages):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

 

 

Amount

 

 

% of Pretax
Earnings

 

 

Amount

 

 

% of Pretax
Earnings

 

 

Amount

 

 

% of Pretax
Earnings

 

Federal statutory rate

 

$

278.7

 

 

 

21.0

 

 

$

204.8

 

 

 

21.0

 

 

$

182.9

 

 

 

21.0

 

State income taxes - net of
   federal benefit

 

 

32.9

 

 

 

2.5

 

 

 

30.7

 

 

 

3.2

 

 

 

22.2

 

 

 

2.6

 

Differences related to non U.S. operations

 

 

(31.9

)

 

 

(2.4

)

 

 

(8.7

)

 

 

(0.9

)

 

 

(2.5

)

 

 

(0.3

)

Alternative energy and other
   tax credits

 

 

(6.9

)

 

 

(0.5

)

 

 

(199.0

)

 

 

(20.4

)

 

 

(154.3

)

 

 

(17.7

)

Other permanent differences

 

 

22.5

 

 

 

1.7

 

 

 

(3.5

)

 

 

(0.4

)

 

 

(15.7

)

 

 

(1.8

)

Stock-based compensation

 

 

(59.3

)

 

 

(4.5

)

 

 

(40.0

)

 

 

(4.1

)

 

 

(31.4

)

 

 

(3.6

)

Changes in unrecognized tax benefits

 

 

4.0

 

 

 

0.3

 

 

 

0.8

 

 

 

0.1

 

 

 

—

 

 

 

—

 

Change in valuation allowance

 

 

15.5

 

 

 

1.2

 

 

 

26.4

 

 

 

2.7

 

 

 

6.5

 

 

 

0.7

 

Change in tax rates

 

 

(44.5

)

 

 

(3.4

)

 

 

8.6

 

 

 

0.9

 

 

 

5.5

 

 

 

0.6

 

Other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(0.4

)

 

 

—

 

Provision for income taxes

 

$

211.0

 

 

$

15.9

 

 

$

20.1

 

 

$

2.1

 

 

$

12.8

 

 

$

1.5

 

 

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in millions):

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Gross unrecognized tax benefits at January 1

 

$

11.7

 

 

$

11.2

 

Increases in tax positions for current year

 

 

3.8

 

 

 

2.5

 

Settlements

 

 

(1.7

)

 

 

—

 

Lapse in statute of limitations

 

 

(1.4

)

 

 

(1.6

)

Increases in tax positions for prior years

 

 

3.1

 

 

 

0.1

 

Decreases in tax positions for prior years

 

 

(2.1

)

 

 

(0.5

)

Gross unrecognized tax benefits at December 31

 

$

13.4

 

 

$

11.7

 

 

The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $12.3 million and $10.0 million at December 31, 2022 and 2021, respectively. We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. At December 31, 2022 and 2021, we had accrued interest and penalties related to unrecognized tax benefits of $3.4 million and $3.3 million, respectively.

We file income tax returns in the U.S. and in various state, local and foreign jurisdictions. We are routinely examined by tax authorities in these jurisdictions. At December 31, 2022, our corporate returns had been examined by the IRS or the statute had lapsed through calendar year 2018, with the exception of calendar years 2011 through 2012, which are still under examination by the IRS. In addition, from 2011 forward, various state and foreign jurisdictions remain open. It is reasonably possible that our gross unrecognized tax benefits may change within the next twelve months. However, we believe any changes in the recorded balance would not have a significant impact on our consolidated financial statements.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in millions):

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

Alternative minimum tax and other credit carryforwards

 

$

772.7

 

 

$

1,074.0

 

Accrued and unfunded compensation and employee benefits

 

 

321.8

 

 

 

265.6

 

Amortizable intangible assets

 

 

69.3

 

 

 

92.7

 

Compensation expense related to stock options

 

 

11.1

 

 

 

5.8

 

Accrued liabilities

 

 

126.6

 

 

 

112.1

 

Accrued pension liability

 

 

3.1

 

 

 

1.5

 

Investments

 

 

2.6

 

 

 

3.1

 

Net operating loss carryforwards

 

 

129.4

 

 

 

32.7

 

Capital loss carryforwards

 

 

8.1

 

 

 

8.9

 

Lease liabilities

 

 

96.5

 

 

 

106.4

 

Capitalized indirect property costs

 

 

394.1

 

 

 

—

 

Hedging instruments

 

 

—

 

 

 

27.3

 

Other

 

 

4.3

 

 

 

5.0

 

Total deferred tax assets

 

 

1,939.6

 

 

 

1,735.1

 

Valuation allowance for deferred tax assets

 

 

(135.2

)

 

 

(154.9

)

Deferred tax assets

 

 

1,804.4

 

 

 

1,580.2

 

Deferred tax liabilities:

 

 

 

 

 

 

Nondeductible amortizable intangible assets

 

 

433.9

 

 

 

394.7

 

Investment-related partnerships

 

 

6.6

 

 

 

4.6

 

Depreciable fixed assets

 

 

46.5

 

 

 

16.2

 

Right-of-use assets

 

 

88.6

 

 

 

96.9

 

Hedging instruments

 

 

10.7

 

 

 

—

 

Other prepaid items

 

 

11.8

 

 

 

8.8

 

Total deferred tax liabilities

 

 

598.1

 

 

 

521.2

 

Net deferred tax assets

 

$

1,206.3

 

 

$

1,059.0

 

 

 

At December 31, 2022 and 2021, $92.4 million and $165.7 million, respectively, have been included in noncurrent liabilities in the accompanying consolidated balance sheet. AMT credits have been utilized or refunded in 2020, due to the CARES Act legislation, general business and other tax credits of $757.4 million begin to expire, if not utilized, in 2034 and state credits, net of federal benefit, of $14.8 million expire, if not used, by 2027. Net operating loss carryforwards of $129.4 million, related to federal, state and foreign begin to expire, if not utilized in 2023. We expect the historically favorable trend in earnings before income taxes to continue in the foreseeable future. Valuation allowances have been established for certain foreign intangible assets (including nondeductible amortization and earnout payable expenses) and various net operating loss carryforwards that may not be utilized in the future.

There are undistributed earnings of $835.1 million and $806.0 million at December 31, 2022 and 2021, respectively, of foreign subsidiaries which are considered permanently invested outside of the U.S. The amount of unrecognized deferred tax liability on these undistributed earnings was not material at December 31, 2022 and 2021. There are only select jurisdictions for which the company regards the undistributed earnings as no longer permanently reinvested. We have recognized the deferred tax liability associated with these undistributed earnings during 2022, however, such liability was also not material.

Current U.S. tax law requires U.S. shareholders to include in income certain “global intangible low-taxed income” (which we refer to as GILTI) beginning in 2018. Our policy is to include the GILTI income in the future period when the tax arises and we recorded income tax expense on such income in 2022, 2021 and 2020. Current U.S. tax law includes the U.S. Base Erosion and Anti-Abuse Tax (which we refer to as BEAT) beginning in 2018. Based on our analysis, we determined that our base erosion payments do not exceed the threshold for applicability for the years in 2022, 2021 and 2020, and we do not currently anticipate any significant long-term impact from the BEAT in our provision for income taxes in future periods.

Deferred Income Taxes - The CARES Act delayed certain payroll tax payments until the years 2021 and 2022. At December 31, 2021, $6.5 million, of deferred tax assets have been included due to deferral of payroll taxes, which was reversed in 2022.