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INCOME TAX
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAX INCOME TAX
The income tax expense for the years ended December 31, 2024, 2023 and 2022 consisted of the following:

Years Ended December 31,
202420232022
(in thousands)
Current income tax expense (benefit): 
Federal$361,904 $399,900 $277,120 
State78,314 98,224 68,120 
Foreign201,143 209,955 125,580 
 641,361 708,079 470,820 
Deferred income tax expense (benefit):
Federal(238,554)(330,647)(235,727)
State(46,689)(84,729)(41,770)
Foreign(60,985)(83,683)(26,629)
 (346,228)(499,059)(304,126)
$295,133 $209,020 $166,694 
 
Income tax expense allocated to noncontrolling interests was $16.6 million, $12.9 million and $9.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The following table presents income (loss) before income taxes for the years ended December 31, 2024, 2023 and 2022:

Years Ended December 31,
202420232022
(in thousands)
United States$1,255,792 $597,969 $(189,030)
Foreign612,995 571,978 413,352 
$1,868,787 $1,169,947 $224,322 

Approximately $60.5 million of our undistributed foreign earnings are considered to be indefinitely reinvested outside the United States as of December 31, 2024. Because those earnings are considered to be indefinitely reinvested, no deferred income taxes have been provided thereon. If we were to make a distribution of any portion of those earnings in the form of dividends or otherwise, any such amounts would be subject to withholding taxes payable to various foreign jurisdictions; however, the amounts would not be subject to any additional U.S. income tax.
Our effective tax rates for the years ended December 31, 2024, 2023 and 2022 differ from the federal statutory rate for those periods as follows:

Years Ended December 31,
202420232022
Federal U.S. statutory rate21.0 %21.0 %21.0 %
Foreign inclusion, net of foreign tax credits2.3 3.4 8.2 
Foreign income taxes1.8 2.2 1.4 
State income taxes, net of federal income tax benefit1.3 0.9 9.0 
Uncertain tax positions0.9 0.5 (0.7)
Nondeductible executive compensation0.3 0.9 4.7 
Share-based compensation expense0.2 0.9 2.0 
Deemed royalty0.2 0.7 1.2 
Net gain on dispositions and liquidations— 4.3 12.1 
Goodwill impairment— — 78.0 
Valuation allowance(0.3)(0.4)(0.2)
Foreign-derived intangible income deduction(1.7)(3.8)(12.4)
Tax credits(4.4)(3.8)(19.5)
Foreign interest income not subject to tax(6.3)(9.5)(29.9)
Other0.5 0.6 (0.6)
Effective tax rate15.8 %17.9 %74.3 %
Deferred income taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax laws and rates. Deferred income taxes as of December 31, 2024 and 2023 reflect the effect of temporary differences between the amounts of assets and liabilities for financial accounting and income tax purposes. As of December 31, 2024 and 2023, principal components of deferred tax items were as follows:

20242023
(in thousands)
Deferred income tax assets:
Research and development costs$286,859 $267,098 
Foreign net operating loss carryforwards223,535 187,247 
Credits200,474 144,053 
Financial instruments110,621 91,032 
Lease liabilities69,751 89,645 
Accrued expenses51,632 54,478 
Share-based compensation expense33,683 42,376 
Domestic net operating loss carryforwards28,711 34,121 
Other100,507 72,484 
1,105,773 982,534 
Valuation allowance(241,197)(211,049)
864,576 771,485 
Deferred tax liabilities:
Acquired intangibles1,286,709 2,200,082 
Partnership interests896,411 238,139 
Property and equipment360,066 398,439 
Right-of-use assets42,441 59,124 
Other5,862 6,094 
2,591,489 2,901,878 
Net deferred income tax liability$1,726,913 $2,130,393 

During the year ended December 31, 2024, as part of the integration of EVO into our Merchant Solutions business, certain deferred taxes, primarily those related to acquired intangibles, property and equipment and research and development costs, were reclassified into partnership interests. The net deferred income taxes reflected in our consolidated balance sheets as of December 31, 2024 and 2023 are as follows:

20242023
(in thousands)
Noncurrent deferred income tax asset$(106,083)$(111,712)
Noncurrent deferred income tax liability1,832,996 2,242,105 
Net deferred income tax liability$1,726,913 $2,130,393 
A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Changes to our valuation allowance during the years ended December 31, 2024, 2023 and 2022 are summarized below (in thousands):

Balance at December 31, 2021$(112,259)
Allowance for foreign net operating losses(122)
Allowance for foreign tax credits60 
Allowance for state tax credits2,282 
Allowance for domestic net operating losses(4)
Balance at December 31, 2022(110,043)
Allowance for foreign net operating losses(674)
Allowance for foreign tax credits(101,271)
Allowance for state tax credits3,079 
Allowance for state interest limitation(2,335)
Allowance for domestic net operating losses195 
Balance at December 31, 2023(211,049)
Allowance for foreign net operating losses(12,533)
Allowance for foreign tax credits(16,975)
Allowance for state tax credits(463)
Allowance for state interest limitation(177)
Balance at December 31, 2024$(241,197)

The change in the valuation allowance for the year ended December 31, 2024 is primarily related to foreign tax credits and foreign net operating loss carryforwards. The change in the valuation allowance for the year ended December 31, 2023 is primarily related to anticipatory foreign tax credits and state interest deduction carryforwards offset by recognition of state tax credit carryforwards determined more likely than not to be realized. The decrease in the valuation allowance for the year ended December 31, 2022 is primarily related to the utilization of state tax credit carryforwards.

Foreign net operating loss carryforwards of $110.6 million will expire between December 31, 2025 and December 31, 2044, if not utilized. Foreign net operating loss carryforwards of $112.9 million have indefinite carryforward periods. Domestic net operating loss carryforwards of $28.7 million and tax credit carryforwards of $103.0 million will expire between December 31, 2025 and December 31, 2044, if not utilized.

We conduct business globally and file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities around the world. We are no longer subject to state income tax examinations for years ended on or before December 31, 2015, U.S. federal income tax examinations for years ended on or before December 31, 2016 and international corporation tax examinations for years ended on or before December 31, 2020.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits, excluding penalties and interest, for the years ended December 31, 2024, 2023 and 2022 is as follows:

Years Ended December 31,
202420232022
(in thousands)
Balance at the beginning of the year$43,229 $31,315 $34,905 
Additions related to acquisitions— 4,054 — 
Reductions for income tax positions of prior years(164)(887)(8,301)
Settlements with income tax authorities(1,656)(988)(3,245)
Additions for income tax positions of prior years9,092 1,809 911 
Additions based on income tax positions related to the current year7,801 7,926 7,045 
Balance at the end of the year$58,302 $43,229 $31,315 

As of December 31, 2024, the total amount of gross unrecognized income tax benefits that, if recognized, would affect the provision for income taxes is $56.8 million.