XML 35 R22.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
For the years ended December 31, 2022, 2021, and 2020, our income tax provision was calculated based on income before income taxes as follows (in thousands):
 202220212020
United States$523,273 $497,421 $228,181 
Foreign35,477 31,882 24,145 
 $558,750 $529,303 $252,326 
Foreign income for each of the years ended December 31, 2022, 2021, and 2020 was predominantly earned in the United Kingdom.
The income tax provision for the years ended December 31, 2022, 2021, and 2020 consisted of the following (in thousands):
 202220212020
Current provision:   
Federal$100,707 $95,782 $115,633 
State and local36,547 35,883 36,182 
Foreign4,891 4,420 3,922 
 142,145 136,085 155,737 
Deferred provision (benefit)10,483 9,517 (36,354)
 $152,628 $145,602 $119,383 
For the year ended December 31, 2022, our income tax provision was $152.6 million compared to $145.6 million for the year ended December 31, 2021 and $119.4 million for the year ended December 31, 2020. The increase in the income tax provision year-over-year was primarily due to increased income before income taxes. Additionally, the increase in the income tax provision for 2021, when compared to 2020, was partially attributable to the effect of certain increases in the deferred state tax provision.
The income tax rates on income before income taxes for the years ended December 31, 2022, 2021, and 2020, were 27.3%, 27.5%, and 47.3%, respectively. The slight decrease in the 2022 effective income tax rate, when compared to 2021, was attributable to the favorable impact of certain discrete tax items. The decrease in the 2021 effective income tax rate, when compared to 2020, was predominantly due to the tax effect, in 2020, of the impairment charges recorded during such year, the majority of which were non-deductible for tax purposes. Refer to Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements for further discussion regarding such impairment charges.
Items accounting for the differences between income taxes computed at the federal statutory rate and the income tax provision for the years ended December 31, 2022, 2021, and 2020 were as follows (in thousands):
 202220212020
Federal income taxes at the statutory rate$117,338 $111,118 $52,989 
State and local income taxes, net of federal tax benefits29,519 31,257 19,290 
Permanent differences5,261 5,316 5,860 
Non-deductible impairment charges— — 40,165 
Foreign income taxes (including UK statutory rate changes)(155)(2,241)(140)
Other665 152 1,219 
 $152,628 $145,602 $119,383 
NOTE 11 - INCOME TAXES (Continued)
The net minimum tax on global intangible low-taxed income for certain earnings of our foreign subsidiaries was approximately $0.1 million for each of the years ended December 31, 2022, 2021, and 2020. The Company recognizes such tax as an expense in the period incurred.
As of December 31, 2022, we had undistributed foreign earnings from certain foreign subsidiaries of approximately $145.2 million. Based on our evaluation, and given that a significant portion of such earnings were subject to tax in prior periods, or are indefinitely reinvested, we have concluded that any taxes associated with the repatriation of such foreign earnings would be immaterial. As of December 31, 2022, the amount of cash held by these foreign subsidiaries was approximately $115.8 million which, if repatriated, should not result in any material federal or state income taxes.
We file a consolidated federal income tax return including all of our U.S. subsidiaries with the Internal Revenue Service. We additionally file income tax returns with various state, local, and foreign tax agencies. Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2017 through 2020.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides for various tax relief and tax incentive measures, which did not have a material impact on our results of operations. Certain provisions of the CARES Act, however, did favorably impact our liquidity throughout 2020 as they allowed for the deferral of the employer’s portion of Social Security tax payments. Amounts previously deferred were repaid in two installments of approximately $51 million during each of the fourth quarters of 2022 and 2021.
On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law. This act provides for tax relief, as well as an omnibus appropriations package that extends various expiring tax provisions and allows for a 100% tax deduction for the cost of business meals in 2021 and 2022. The Consolidated Appropriations Act did not have a material impact on our income tax provision for the years ended December 31, 2022 and 2021.
On March 11, 2021, the American Rescue Plan Act was signed into law. Such act includes certain tax provisions that could have an impact on the Company in future periods, including expanded limits on compensation deductions under Section 162(m) of the Internal Revenue Code for tax years beginning after December 31, 2026. We are currently evaluating the impact that this act may have on our financial position and/or results of operations; however, we anticipate that the expanded provisions of Section 162(m) will result in an increase in our effective income tax rate for years beginning after December 31, 2026.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was signed into law. Among other provisions, such act creates an excise tax of 1% on the fair value of net stock repurchases in excess of share issuances made by publicly traded U.S. corporations, effective for repurchases after December 31, 2022. The impact of this excise tax on our financial position, and/or liquidity, in future periods, will vary based on the level of repurchases made by us in a given year. While we are still evaluating the potential impact of this excise tax on our results of operations, interpretive accounting guidance indicates that this tax can be recorded as a component of treasury stock, as opposed to an expense within the statement of operations, given that it is a direct cost associated with the repurchase of our common stock.
For tax years beginning after December 31, 2022, the Inflation Reduction Act additionally creates a 15% corporate alternative minimum tax on profits of corporations whose average annual adjusted financial statement income exceeds $1.0 billion for any consecutive three-tax-year period preceding the then current tax year. Based on our average annual income for the preceding three years, which has remained below the aforementioned $1.0 billion threshold, as well as the fact that our effective federal income tax rate has historically been in excess of the 15% alternative minimum tax rate, we do not anticipate that this alternative minimum tax will have an impact on our financial position and/or results of operations.
NOTE 11 - INCOME TAXES (Continued)
Deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and income tax bases of assets and liabilities. The deferred income tax assets and deferred income tax liabilities recorded as of December 31, 2022 and 2021 were as follows (in thousands):
 December 31, 2022December 31, 2021
Deferred income tax assets:  
Excess of amounts expensed for financial statement purposes over amounts deducted for income tax purposes:  
Insurance liabilities$57,278 $50,316 
Operating lease liabilities78,391 76,451 
Deferred compensation40,682 40,080 
Accrued federal payroll taxes (1)
— 14,235 
Other (including liabilities and reserves)35,584 31,252 
Total deferred income tax assets211,935 212,334 
Valuation allowance for deferred tax assets(3,580)(2,465)
Net deferred income tax assets208,355 209,869 
Deferred income tax liabilities:  
Costs capitalized for financial statement purposes and deducted for income tax purposes:  
Goodwill and identifiable intangible assets(153,767)(154,382)
Operating lease right-of-use assets(73,134)(71,759)
Depreciation of property, plant and equipment(28,435)(25,341)
Pension asset(4,082)(1,847)
Other(10,500)(7,491)
Total deferred income tax liabilities(269,918)(260,820)
Net deferred income tax liabilities$(61,563)$(50,951)
_________________
(1)Represents employer Social Security tax payments previously deferred under the CARES Act.
At December 31, 2022 and 2021, our net deferred income tax liabilities of $61.6 million and $51.0 million, respectively, were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheet.
Valuation allowances are established when necessary to reduce deferred income tax assets when it is more likely than not that a tax benefit will not be realized. As of December 31, 2022 and 2021, the total valuation allowance on deferred income tax assets, related to state and local net operating losses, foreign net operating losses, and foreign income tax credit carryovers, was approximately $3.6 million and $2.5 million, respectively. The increase in our valuation allowances at December 31, 2022 was primarily a result of the recognition of additional deferred tax assets related to net operating loss carryovers that we determined we would likely not be able to utilize.
Realization of our deferred income tax assets is dependent on our generating sufficient taxable income in the jurisdictions in which such deferred tax assets will reverse. Although realization is not assured, based on current projections of future taxable income, we believe it is more likely than not that the deferred income tax assets, net of the valuation allowances discussed above, will be realized. However, revisions to our forecasts or declining macroeconomic conditions could result in changes to our assessment of the realization of these deferred income tax assets.