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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Below is a summary of the components of the Company’s income before income taxes for the years ended December 31 (in thousands).
| 2022 |  | 2021 |  | 2020
U.S. | $ | 560,193 |  |  | $ | 485,472 |  |  | $ | 111,880 |
Non-U.S. | 467,002 |  |  | 484,398 |  |  | 214,253 |
Income before income taxes | $ | 1,027,195 |  |  | $ | 969,870 |  |  | $ | 326,133 |
The components of the expense (benefit) for income taxes on the above income are summarized in the table below (in thousands).
| 2022 |  | 2021 |  | 2020
Current tax expense: |  |  |  |  |
U.S. federal | $ | 122,191 |  |  | $ | 117,024 |  |  | $ | 14,480 |
State and local | 48,482 |  |  | 36,266 |  |  | 16,360 |
Foreign | 91,596 |  |  | 64,835 |  |  | 62,993 |
Total current | 262,269 |  |  | 218,125 |  |  | 93,833 |
Deferred tax (benefit) expense: |  |  |  |  |
U.S. federal | (21,337) |  |  | (4,640) |  |  | (7,206) |
State and local | (10,108) |  |  | 3,156 |  |  | (13,121) |
Foreign | (4,232) |  |  | (33,389) |  |  | (22,673) |
Total deferred | (35,677) |  |  | (34,873) |  |  | (43,000) |
Total current and deferred | 226,592 |  |  | 183,252 |  |  | 50,833 |
(Expense) benefit relating to interest rate swaps used to increase equity | (5,569) |  |  | (7,281) |  |  | 8,257 |
Benefit from stock transactions with employees used to increase equity | 66 |  |  | 78 |  |  | 56 |
Benefit relating to defined-benefit pension adjustments used to increase equity | (1,693) |  |  | 261 |  |  | 242 |
Total tax expense | $ | 219,396 |  |  | $ | 176,310 |  |  | $ | 59,388 |
The components of long-term deferred tax assets (liabilities) are summarized in the table below (in thousands).
| December 31,
| 2022 |  | 2021
Accrued liabilities | $ | 72,610 |  |  | $ | 90,384 |
Operating leases | 63,289 |  |  | 60,226 |
Intangible assets | 35,803 |  |  | — |
Loss and credit carryforwards | 37,978 |  |  | 31,662 |
Assets relating to equity compensation | 19,299 |  |  | 15,863 |
Other assets | 16,638 |  |  | 12,195 |
Gross deferred tax assets | 245,617 |  |  | 210,330 |
Valuation allowance | (152,808) |  |  | (23,331) |
Net deferred tax assets | 92,809 |  |  | 186,999 |
Property, equipment and leasehold improvements | (1,856) |  |  | (14,576) |
Intangible assets | — |  |  | (123,523) |
Prepaid expenses | (69,230) |  |  | (70,149) |
Other liabilities | (22,936) |  |  | (20,536) |
Gross deferred tax liabilities | (94,022) |  |  | (228,784) |
Net deferred tax liabilities | $ | (1,213) |  |  | $ | (41,785) |
Net deferred tax assets and net deferred tax liabilities were $138.3 million and $139.5 million as of December 31, 2022, respectively, and $140.0 million and $181.8 million as of December 31, 2021, respectively. These amounts are reported in Other assets and Other liabilities in the Consolidated Balance Sheets. Management has concluded it is more likely than not that the reversal of deferred tax liabilities and results of future operations will generate sufficient taxable income to realize the deferred tax assets, net of the valuation allowance at December 31, 2022. In 2022, the Company recorded a deferred tax asset of approximately $122.9 million for tax basis in intangible assets along with an offsetting valuation allowance of the same amount consistent with changes in the Company’s expectations for recovering amortizable tax basis in certain intellectual property during the period. The valuation allowances of $152.8 million and $23.3 million as of December 31, 2022 and 2021, respectively, primarily related to tax basis in certain intangible assets and loss and credit carryovers that are not likely to be realized. As of December 31, 2022, the Company had state and local tax net operating loss carryforwards of $17.6 million, of which $7.4 million expires within six to fifteen years and $10.2 million expires within sixteen to twenty years. The Company also had state tax credits of $8.0 million, a majority of which will expire in five to six years. As of December 31, 2022, the Company had non-U.S. net operating loss carryforwards of $2.1 million, of which $0.1 million expires over the next 20 years and $2.0 million can be carried forward indefinitely. In addition, the Company also had foreign tax credit carryforwards of $19.7 million, all of which will expire between 2028 and 2032. These amounts have been reduced for associated unrecognized tax benefits, consistent with ASU No. 2013-11, “Income Taxes—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The items comprising the differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate on income before income taxes for the years ended December 31 are summarized in the table below.
| 2022 |  | 2021 |  | 2020
Statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit | 2.4 |  |  | 2.8 |  |  | 1.7 |
Effect of non-U.S. operations | (2.0) |  |  | (3.4) |  |  | (1.8) |
Intercompany sale of intellectual property | — |  |  | (5.6) |  |  | (8.7) |
Net activity in recognized tax benefits | (1.1) |  |  | 1.3 |  |  | 6.4 |
Law changes | — |  |  | 1.3 |  |  | 1.8 |
Stock-based compensation expense | (2.0) |  |  | (2.0) |  |  | (2.8) |
Limitation on executive compensation | 1.4 |  |  | 1.7 |  |  | 1.3 |
Global intangible low-taxed income, net of foreign tax credits | 1.9 |  |  | 1.7 |  |  | 1.4 |
Foreign-derived intangible income | (0.4) |  |  | (0.3) |  |  | (0.8) |
Other items, net | 0.2 |  |  | (0.3) |  |  | (1.3) |
Effective tax rate | 21.4 | % |  | 18.2 | % |  | 18.2 | %
The Company completed intercompany sales of certain intellectual property in 2021 and 2020. As a result, the Company recorded net tax benefits of approximately $54.1 million and $28.3 million during 2021 and 2020, respectively. These benefits represent the value of future tax deductions for amortization of the assets in the acquiring jurisdiction, net of any tax recognized in the selling jurisdiction. The Company’s intellectual property footprint continues to evolve and may result in tax rate volatility in the future. As of December 31, 2022 and 2021, the Company had gross unrecognized tax benefits of $137.2 million and $150.0 million, respectively. The decrease is primarily due to releases for expiration of statutes. The gross unrecognized tax benefits at December 31, 2022 related primarily to transfer pricing on intercompany transactions, the exclusion of stock-based compensation expense from the Company’s cost sharing agreement, and the ability to realize certain refund claims. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $11.7 million within the next twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation. Included in the balance of gross unrecognized tax benefits at December 31, 2022 are potential benefits of $125.8 million that, if recognized, would reduce our effective tax rate on income from continuing operations. Also included in the balance of gross unrecognized tax benefits at December 31, 2022 are potential benefits of $11.4 million that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. The table below is a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31 (in thousands).
| 2022 |  | 2021
Beginning balance | $ | 150,024 |  |  | $ | 127,080 |
Additions based on tax positions related to the current year | 10,989 |  |  | 29,636 |
Additions for tax positions of prior years | 12,153 |  |  | 2,756 |
Reductions for tax positions of prior years | (485) |  |  | (4,592) |
Reductions for expiration of statutes | (30,817) |  |  | (3,240) |
Settlements | (2,177) |  |  | (147) |
Change in foreign currency exchange rates | (2,460) |  |  | (1,469) |
Ending balance | $ | 137,227 |  |  | $ | 150,024 |
The Company accrues interest and penalties related to gross unrecognized tax benefits in its income tax provision. As of December 31, 2022 and 2021, the Company had $16.3 million and $14.3 million, respectively, of accrued interest and penalties related to gross unrecognized tax benefits. These amounts are in addition to the gross unrecognized tax benefits disclosed above. The total amount of interest and penalties recognized in the income tax provision during 2022 and 2021 was $2.4 million and $4.2 million, respectively. The number of years with open statutes of limitation varies depending on the tax jurisdiction. The Company’s statutes are open with respect to the U.S. federal jurisdiction for 2019 and forward, India for 2005 and forward, and Ireland for 2018 and forward. For other major taxing jurisdictions, including U.S. states, the United Kingdom, Canada, Japan, Cyprus, and France, the Company’s statutes vary and are open as far back as 2012. The Organization for Economic Co-operation and Development (the “OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation (BEPS 2.0/ Pillar Two), focusing on global profit allocation and a global minimum tax rate. On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15%, to be effective as of January 2024. Other countries are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. In December 2022, South Korea enacted new global minimum tax rules to align with Pillar Two. The enactment of Pillar Two legislation could have a material adverse effect on the Company's effective tax rate, financial position, results of operations, and cash flows. The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate. Under U.S. GAAP, no provision for income taxes that may result from the remittance of earnings held overseas is required if the Company has the ability and intent to indefinitely reinvest such funds overseas. The Company continues to assert its intention to reinvest all accumulated undistributed foreign earnings in its non-U.S. operations, except in instances where the repatriation of those earnings would result in minimal additional tax. Consequently, the Company has not recognized income tax expense that would result from the remittance of those earnings. The accumulated undistributed earnings of non-U.S. subsidiaries were approximately $120.3 million as of December 31, 2022.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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