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INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

17.        INCOME TAXES

The Company evaluated the various provisions of the Tax Reform Act, including, the global intangible low-taxed income (“GILTI”) and the foreign derived intangible income provisions. The Company will treat any U.S. tax on foreign earnings under GILTI as a current period expense when incurred.

Consolidated retained earnings at December 31, 2023 included undistributed after-tax earnings from certain non-U.S. subsidiaries that were not indefinitely reinvested. At December 31, 2023, the Company had a deferred tax liability of $8.4 million for the estimated taxes associated with the repatriation of these earnings. Undistributed earnings of approximately $583 million in foreign subsidiaries were indefinitely reinvested in foreign operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings was not practicable.

The domestic and foreign components of the Company’s income before provision for income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2023			2022			2021
Domestic*		$	1,809,418		$	1,327,459		$	1,431,797
Foreign*	​	​	259,064	​	​	244,505	​	​	369,622
Income before provision for income taxes		$	2,068,482		$	1,571,964		$	1,801,419

​

*After intercompany royalties, management fees and interest charges from the Company’s domestic to foreign entities of $101.4 million, $85.0 million and $61.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Components of the provision for income taxes are as follows:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2023			2022			2021
Current:	​	​	​	​	​	​	​	​	​
Federal		$	259,911		$	247,482		$	273,115
State	​	​	47,079	​	​	47,255	​	​	44,990
Foreign	​	​	99,563	​	​	37,421	​	​	89,410
​	​	​	406,553	​	​	332,158	​	​	407,515
​	​	​	​	​	​	​	​	​	​
Deferred:	​	​	​	​	​	​	​	​	​
Federal	​	​	42,237	​	​	19,111	​	​	14,750
State	​	​	2,376	​	​	258	​	​	4,689
Foreign	​	​	(13,936)	​	​	26,084	​	​	5,092
​	​	​	30,677	​	​	45,453	​	​	24,531
​	​	​	​	​	​	​	​	​	​
Valuation allowance	​	​	264	​	​	2,729	​	​	(8,102)
​		$	437,494		$	380,340		$	423,944

​

A reconciliation of the total provision for income taxes after applying the U.S. federal statutory rate of 21% to income before provision for income taxes to the reported provision for income taxes are as follows for the years ended:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2023			2022			2021
U.S. Federal tax expense at statutory rates		$	434,381		$	330,113		$	378,298
State income taxes, net of federal tax benefit	​	​	39,416	​	​	35,848	​	​	38,894
Permanent differences	​	​	(27,235)	​	​	(5,450)	​	​	(4,168)
Stock-based compensation	​	​	(43,846)	​	​	3,571	​	​	2,790
Residual tax on undistributed foreign earnings	​	​	8,423	​	​	—	​	​	—
Other	​	​	(5,132)	​	​	1,371	​	​	(649)
Foreign rate differential	​	​	31,223	​	​	12,158	​	​	16,881
Valuation allowance	​	​	264	​	​	2,729	​	​	(8,102)
​		$	437,494		$	380,340		$	423,944

​

Major components of the Company’s deferred tax assets (liabilities) at December 31, 2023 and 2022 are as follows:

​

​	​	​	​	​	​	​
​		2023			2022
Deferred Tax Assets:	​	​	​	​	​	​
Reserve for sales returns		$	1,438		$	2,262
Reserve for inventory obsolescence	​	​	4,022	​	​	4,651
Reserve for marketing development fund	​	​	8,358	​	​	7,487
Capitalization of inventory costs	​	​	12,159	​	​	6,537
State franchise tax - current	​	​	2,511	​	​	2,339
Accrued compensation	​	​	12,413	​	​	10,499
Accrued other liabilities	​	​	1,729	​	​	1,820
Deferred revenue	​	​	58,156	​	​	63,196
Stock-based compensation	​	​	19,093	​	​	25,526
Foreign net operating loss carryforward	​	​	27,000	​	​	19,896
Prepaid supplies	​	​	10,567	​	​	7,901
Termination payments	​	​	46,810	​	​	52,466
Operating lease liabilities	​	​	5,739	​	​	5,739
Intangibles	​	​	30,952	​	​	33,603
Impairment-trademarks and others	​	​	12,715	​	​	2,567
Other deferred tax assets	​	​	64,955	​	​	33,209
Total gross deferred tax assets		$	318,617		$	279,698
​	​	​	​	​	​	​
Deferred Tax Liabilities:	​	​	​	​	​	​
Amortization of trademarks		$	(76,536)		$	(39,237)
State franchise tax - deferred	​	​	(5,038)	​	​	(5,503)
Operating lease ROU assets	​	​	(5,739)	​	​	(5,739)
Bang transaction gain	​	​	(10,698)	​	​	—
Other deferred tax liabilities	​	​	(8,784)	​	​	(5)
Depreciation	​	​	(35,708)	​	​	(22,433)
Total gross deferred tax liabilities	​	​	(142,503)	​	​	(72,917)
​	​	​	​	​	​	​
Valuation Allowance	​	​	(30,007)	​	​	(29,742)
​	​	​	​	​	​	​
Net deferred tax assets		$	146,107		$	177,039

​

During the years ended December 31, 2023, 2022 and 2021, the Company established full valuation allowances against certain deferred tax assets, resulting from cumulative net operating losses incurred by certain foreign subsidiaries of the Company. The effect of the valuation allowances and the subsequent related impact on the Company’s overall tax rate was to increase the Company’s provision for income taxes by $0.2 million for the year ended December 31, 2023, increase the Company’s provision for income taxes by $2.7 million for the year ended December 31, 2022 and decrease the Company’s provision for income taxes by $8.1 million for the year ended December 31, 2021. At December 31, 2023, the Company had net operating loss carryforwards of approximately $103.9 million. Of this amount, $79.5 million may be carried forward indefinitely. The remaining $24.4 million of net operating loss carryforwards will begin to expire in 2024.

The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for the years ended December 31, 2023, 2022 and 2021:

​

​	​	​	​
​		Gross Unrecognized Tax
​	​	Benefits
Balance at December 31, 2020	​	$	742
Additions for tax positions related to the current year	​		—
Additions for tax positions related to the prior year	​		—
Decreases for tax positions related to prior years	​		(742)
Balance at December 31, 2021	​	$	—
Additions for tax positions related to the current year	​	​	—
Additions for tax positions related to the prior year	​	​	3,020
Decreases for tax positions related to prior years	​	​	—
Balance at December 31, 2022	​	$	3,020
Additions for tax positions related to the current year	​	​	—
Additions for tax positions related to the prior year	​	​	739
Decreases for tax positions related to prior years	​		(650)
Balance at December 31, 2023	​	$	3,109

​

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Company’s consolidated financial statements. As of December 31, 2023, the Company had accrued approximately $0.6 million in interest and penalties related to unrecognized tax benefits. If the Company were to prevail on all uncertain tax positions, it would not have a significant impact on the Company’s effective tax rate.

It is expected that any change in the amount of unrecognized tax benefit change within the next 12 months will not be significant.

The Company is subject to U.S. federal income tax as well as to income tax in multiple state and foreign jurisdictions.

The Company is in various stages of examination with certain states and certain foreign jurisdictions. The Company’s 2020 through 2022 U.S. federal income tax returns are subject to examination by the IRS. The Company’s state income tax returns are subject to examination for the 2019 through 2022 tax years. The United Kingdom and Ireland income tax returns are subject to examination for the 2019 through 2022 tax years.

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The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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