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Note 13 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

13.    Income Taxes:

 

Domestic and foreign income before income taxes was as follows:

 

  

2023

  

2022

  

2021

 

U.S.

 $1,021.9  $1,277.1  $784.1 

Foreign

  5.3   (14.7)  2.4 

Total income before income taxes

 $1,027.2  $1,262.4  $786.5 

 

The components of the provision for income taxes for the years ended December 31 were as follows:

 

  

2023

  

2022

  

2021

 

Current:

            

Federal

 $226.8  $247.8  $123.8 

State and local

  52.0   64.7   19.5 

Foreign

  9.0   1.1   3.0 

Total current provision for income taxes

  287.8   313.6   146.3 

Deferred:

            

Federal

  (23.4)  (43.3)  20.6 

State and local

  (3.4)  (11.2)  10.5 

Foreign

  (2.2)  (38.8)  2.0 

Total deferred provision for income taxes

  (29.0)  (93.3)  33.1 

Provision for income taxes

 $258.8  $220.3  $179.4 

 

The reconciliation between our effective tax rate and the statutory tax rate is as follows for the years ended December 31:

 

  

2023

  

2022

  

2021

 

Federal statutory rate

  21.0%  21.0%  21.0%

State and local taxes, net of federal tax benefit

  3.7   3.4   2.8 

Impact of dispositions

  -   (3.0)  - 

UK valuation allowance release

  -   (2.4)  - 

Global Intangible Low-taxed Income

  1.3   0.4   2.6 

Stock-based compensation

  (1.8)  (1.7)  (3.5)

Other

  1.0   (0.2)  (0.1)

Effective tax rate

  25.2%  17.5%  22.8%

 

The increase in the effective tax rate in 2023 compared to 2022 was primarily due to tax rate benefits in 2022 related to the sale of 3E and a release of a United Kingdom valuation allowance associated with interest expense utilization. In addition, the tax rate for 2023 was higher than the prior year due to tax charges incurred in structuring the Energy sale in the first quarter, which are reflected in the Global Intangible Low-taxed Income and Other lines above. Also included in the "Other" line above is the unfavorable impact of the litigation reserve expense of $38.2 million associated with an indemnification of an ongoing inquiry related to our former Financial Services segment that is anticipated to be mostly non-deductible.

 

The tax effects of significant items comprising our deferred tax assets and liabilities as of  December 31 are as follows:

 

  

2023

  

2022

 

Deferred tax assets:

        

Employee wages and other benefits

 $49.9  $54.9 

Lease liabilities

  55.4   53.3 

Net operating loss carryover

  9.4   12.0 

Interest expense

  31.0   31.1 

Book/tax energy basis difference

  -   112.2 

Other

  17.1   22.0 

Total

  162.8   285.5 

Less valuation allowance

  (5.6)  (45.3)

Deferred tax assets

  157.2   240.2 

Deferred tax liabilities:

        

Right of use assets

  (48.3)  (44.1)

Fixed assets and intangible assets

  (194.1)  (223.9)

Commissions

  (18.2)  (16.8)

Pensions

  (57.0)  (56.5)

Other

  (18.9)  (12.8)

Deferred tax liabilities

  (336.5)  (354.1)

Deferred tax liabilities, net

 $(179.3) $(113.9)

 

The net deferred tax liabilities of $179.3 million consist primarily of timing differences involving amortization.

 

Our net operating loss carryforwards expire as follows:

 

Years Ending

 

Amount

 
2024 - 2031 $20.5 
2032 - 2036  11.5 
2037 - 2043  37.0 

Total

 $69.0 

 

A valuation allowance has been established based on our evaluation of the likelihood of utilizing these benefits before they expire. Other than these items, we have determined, based on our historical operating performance, that our taxable income will more likely than not be sufficient to fully realize the deferred tax assets.

 

As of December 31, 2023, we have not made a provision for U.S. or additional foreign withholding taxes for any additional outside basis difference inherent in our foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practicable. We do not rely on these unremitted earnings as a source of funds for our domestic business as we expect to have sufficient cash flow in the U.S. to fund our U.S. operational and strategic needs.

 

We follow ASC 740-10 which prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. For each tax position, we must determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to recognize within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:

 

  

2023

  

2022

  

2021

 

Unrecognized tax benefit as of January 1

 $3.2  $3.4  $9.9 

Gross increase in tax positions in prior period

  0.8   1.0   1.3 

Gross decrease in tax positions in prior period

  -   -   (0.1)

Settlements

  -   (0.6)  — 

Lapse of statute of limitations

  (2.0)  (0.6)  (7.7)

Unrecognized tax benefit as of December 31

 $2.0  $3.2  $3.4 

 

All unrecognized tax benefits as of  December 31, 2023, 2022, and 2021 would have a favorable impact on our effective tax rate if recognized in any future periods.

 

The total gross amount of accrued interest and penalties for the years ended December 31, 2023, 2022, and 2021 was $0.2 million, $0.4 million, and $0.5 million, respectively. Our practice is to recognize interest and penalties associated with income taxes as a component of “Provision for income taxes” in our accompanying consolidated statements of operations.

 

We do not expect a significant change in unrecognized benefits related to federal, state, or foreign tax exposures within the coming year. In addition, we believe that it is reasonably possible that approximately $0.7 million of our currently remaining unrecognized tax positions, each of which is individually insignificant, may be recognized by the end of 2024 as a result of a combination of audit settlements and lapses of statute of limitations, net of additional uncertain tax positions.

 

We are subject to tax in the U.S., various state, and foreign jurisdictions, and are routinely under audit by various tax authorities. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-US income tax examinations by tax authorities for tax years before 2019. We do not expect the results of current examinations to have a material effect on our financial position, results of operations, or cash flow.