XML 36 R21.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES:
The components of income before income taxes were as follows (in thousands):
 Year Ended December 31,
 202320222021
Income before income taxes:   
Domestic$823,691 $532,051 $534,302 
Foreign146,265 171,835 88,599 
Total$969,956 $703,886 $622,901 
The components of the provision for income taxes were as follows (in thousands):
 Year Ended December 31,
 202320222021
Current:   
Federal$132,727 $97,673 $65,273 
State42,783 29,439 32,930 
Foreign39,941 23,078 6,644 
Total current tax provision215,451 150,190 104,847 
Deferred:
Federal16,055 29,657 27,762 
State(556)4,225 (2,418)
Foreign(11,683)8,171 727 
Total deferred tax provision (benefit)3,816 42,053 26,071 
Total provision for income taxes$219,267 $192,243 $130,918 
Income taxes related to other income (loss) within other comprehensive income (loss) was an expense of $0.4 million, a benefit of $0.2 million and an expense of $0.4 million for the years ended December 31, 2023, 2022 and 2021. There was no tax on foreign currency translation adjustment within other comprehensive income (loss) for the years ended December 31,
2023, 2022 and 2021.
The actual income tax provision differed from the income tax provision computed by applying the U.S. federal statutory corporate rate to income before provision for income taxes as follows (in thousands):
Year Ended December 31,
202320222021
Provision at the statutory rate$203,691 $147,816 $130,809 
Increases (decreases) resulting from:
State taxes41,920 28,320 27,204 
Employee per diems, meals and entertainment27,039 6,086 3,569 
Tax contingency reserves, net6,882 7,939 844 
Foreign taxes2,927 (638)(9,359)
Company-owned life insurance(2,262)2,917 (6,969)
Taxes on certain equity method investments and non-controlling interests(9,519)(12,886)(8,825)
Valuation allowance on deferred tax assets(20,177)23,366 6,107 
Stock-based compensation(35,007)(24,066)(21,271)
Other3,773 13,389 8,809 
Total provision for income taxes$219,267 $192,243 $130,918 
Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and tax purposes. The tax effects of these temporary differences, representing deferred tax assets and liabilities, result principally from the following (in thousands):
December 31,
20232022
Deferred income tax liabilities:
Property and equipment$(350,204)$(286,950)
Goodwill(167,275)(129,491)
Leased assets(106,325)(84,870)
Retainage(16,590)(28,773)
Other
(2,318)— 
Total deferred income tax liabilities(642,712)(530,084)
Deferred income tax assets:  
Lease liabilities103,308 84,189 
Other intangible assets100,478 73,654 
Accruals and reserves69,081 48,168 
Stock and incentive compensation62,590 55,413 
Net operating loss carryforwards62,523 56,556 
Tax credits28,802 34,413 
Equity method investments and non-controlling interests8,357 5,878 
Deferred tax benefits on unrecognized tax positions6,327 8,899 
Other— 5,849 
Subtotal441,466 373,019 
Valuation allowance(40,013)(58,461)
Total deferred income tax assets401,453 314,558 
Total net deferred income tax liabilities$(241,259)$(215,526)
The net deferred income tax assets and liabilities comprised the following in the accompanying consolidated balance sheets (in thousands):
 December 31,
 20232022
Deferred income taxes:  
Assets$12,745 $12,335 
Liabilities(254,004)(227,861)
Total net deferred income tax liabilities$(241,259)$(215,526)
The valuation allowances for deferred income tax assets at December 31, 2023, 2022 and 2021 were $40.0 million, $58.5 million and $41.3 million. These valuation allowances relate to state and foreign net operating loss carryforwards and foreign tax credits. The valuation allowances were established primarily as a result of uncertainty in Quanta’s outlook as to the amount and character of future taxable income in particular tax jurisdictions. Quanta believes it is more likely than not that it will realize the benefit of its deferred tax assets net of existing valuation allowances.
The net changes in the total valuation allowance for each of the years ended December 31, 2023, 2022 and 2021 were a decrease of $18.5 million, an increase of $17.2 million and a decrease of $1.9 million. The change in valuation allowance during the year ended December 31, 2023 resulted in a $20.2 million decrease in tax expense, primarily due to the release of the $22.7 million valuation allowance on Quanta’s investment in Starry, and a $2.9 million reduction due to utilization of certain foreign net operating losses. These decreases were partially offset by $5.6 million of new valuation allowances primarily placed on foreign net operating losses during the year. The total valuation allowance also increased by $1.7 million in currency translation adjustments on previously provided valuation allowances. During the year ended December 31, 2022, Quanta recognized $91.5 million of unrealized losses on its investment in Starry and recorded a valuation allowance against such unrealized losses. During the three months ended March 31, 2023, Starry filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, as amended. On August 31, 2023, the equity securities held by Quanta were cancelled pursuant to an approved plan of reorganization in such bankruptcy proceeding. As a result, Quanta’s cumulative $91.5 million loss on its investment in Starry was realized during the year ended December 31, 2023. This realized loss can be utilized to offset gains from tax years 2020 through 2023, and can be carried forward to offset future capital gains realized in tax years 2024 through 2028. Quanta has identified sufficient sources of capital loss carry backs and forecasted capital gain income in these periods such that the full $22.7 million valuation allowance on the Starry capital loss was released during the year ended December 31, 2023.
The change in valuation allowance during the year ended December 31, 2022 resulted in a $23.3 million increase in tax expense due primarily to $22.7 million in new valuation allowances recorded on unrealized losses on Quanta’s investment in Starry as further described above and in Note 8. The total valuation allowance increased by $17.2 million from December 31, 2021 to December 31, 2022 primarily as a result of the $22.7 million valuation allowance related to Starry mentioned above, partially offset by a reduction of $4.8 million due to the removal of deferred tax assets that were no longer available to be carried forward to future years for which a valuation allowance had been provided in prior years, as well as currency translation adjustments on previously provided valuation allowances.
The change in valuation allowance during the year ended December 31, 2021 resulted in a $6.1 million increase in tax expense due to approximately $8.5 million of new valuation allowances primarily recorded on foreign net operating losses, which was partially offset by a $2.4 million valuation allowance release recorded due to the completion of certain internal restructuring efforts that increased management’s visibility into future utilization of certain state net operation losses.
At December 31, 2023, Quanta had state and foreign net operating loss carryforwards, the tax effect of which was $63.9 million. These carryforwards will expire as follows: 2024, $0.1 million; 2025, $5.7 million; 2026, $1.1 million; 2027, $1.1 million; and $55.9 million after 2028. A valuation allowance of $30.4 million has been recorded against certain foreign and state net operating loss carryforwards.
Quanta generally does not provide for taxes related to undistributed earnings of its foreign subsidiaries because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. Quanta could also be subject to additional foreign withholding taxes if it were to repatriate cash that is indefinitely reinvested outside the United States, but it does not expect such amount to be material.
A reconciliation of unrecognized tax benefit balances is as follows (in thousands):
 December 31,
 202320222021
Balance at beginning of year$41,639 $37,737 $33,219 
Additions based on tax positions related to the current year10,304 11,699 6,881 
Additions for tax positions of prior years— 230 2,339 
Reductions for tax positions of prior years— (407)— 
Reductions for audit settlements— (2,207)— 
Reductions resulting from a lapse of the applicable statute of limitations periods
(6,807)(5,413)(4,702)
Balance at end of year$45,136 $41,639 $37,737 
The balances of unrecognized tax benefits, the amount of related interest and penalties and what Quanta believes to be the range of reasonably possible changes in the next 12 months are as follows (in thousands):
 December 31, 2023
Unrecognized tax benefits$45,136 
Portion that, if recognized, would reduce tax expense and effective tax rate
$42,650 
Accrued interest on unrecognized tax benefits$4,903 
Accrued penalties on unrecognized tax benefits$1,085 
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months
$0 to $8,932
Portion that, if recognized, would reduce tax expense and effective tax rate
$0 to $8,660
Quanta classifies interest and penalties within the provision for income taxes. Quanta recognized interest expense of $0.5 million, interest expense of $0.5 million and interest income of $0.8 million in the provision for income taxes for the years ended December 31, 2023, 2022 and 2021.
Quanta’s consolidated federal income tax returns for tax years 2017, 2018, 2020, and 2021 remain open to examination by the IRS, as the applicable statute of limitations periods have not yet expired. Additionally, various state and foreign tax returns filed by Quanta and certain subsidiaries for multiple periods remain under examination by various U.S. state and foreign tax authorities. Quanta does not consider any U.S. state in which it does business to be a major tax jurisdiction.