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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES C.H. Robinson Worldwide, Inc. and its 80 percent (or more) owned U.S. subsidiaries file a consolidated federal income tax return. We file unitary or separate state returns based on state filing requirements. With few exceptions, we are no longer subject to audits of U.S. federal, state and local, or non-U.S. income tax returns before 2019. In 2023, we came to an agreement with IRS Independent Office of Appeals on a tax position related to Section 199 for the tax years of 2014 through 2017. The Section 199 domestic production activities deduction was eliminated from the tax code as part of the Tax Cuts and Jobs Act in 2017, effective for tax years starting in 2018. Although we maintain our position was appropriate and supportable, we determined it was in our best interest to settle the issue when factoring in litigation costs. Therefore, we have recognized $19.2 million of additional tax expense in 2023, in excess of the existing tax reserve including the impacts of interest, related to the settlement of the matter. In 2023, management made the determination that the company is no longer indefinitely reinvested with regard to the unremitted earnings of any foreign subsidiaries. The change resulted in a one-time increase to tax expense of approximately $2.0 million in the year ended December 31, 2023. The company remains indefinitely reinvested related to other taxable differences that may exist with regard to these subsidiaries. In 2021, the Organization for Economic Cooperation and Development (“OECD”) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15 percent. Subsequently, multiple sets of administrative guidance have been issued. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impact of enacted legislation and pending legislation to enact Pillar Two Model Rules in the tax jurisdictions we operate in. Income before provision for income taxes consisted of (in thousands):
| 2023 |  | 2022 |  | 2021
Domestic | $ | 287,524 |  |  | $ | 799,553 |  |  | $ | 566,847 |
Foreign | 121,662 |  |  | 367,212 |  |  | 455,444 |
Total | $ | 409,186 |  |  | $ | 1,166,765 |  |  | $ | 1,022,291 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
| 2023 |  | 2022 |  | 2021
Unrecognized tax benefits, beginning of period | $ | 39,056 |  |  | $ | 37,302 |  |  | $ | 36,216 |
Additions based on tax positions related to the current year | 2,111 |  |  | 4,064 |  |  | 3,530 |
Additions for tax positions of prior years | 1,268 |  |  | 3,016 |  |  | 1,919 |
Reductions for tax positions of prior years | (91) |  |  | (247) |  |  | (2,431) |
Lapse in statute of limitations | (2,346) |  |  | (5,026) |  |  | (1,932) |
Settlements | (23,082) |  |  | (53) |  |  | — |
Unrecognized tax benefits, end of the period | $ | 16,916 |  |  | $ | 39,056 |  |  | $ | 37,302 |
Income tax expense considers amounts that may be needed to cover exposures for open tax years. We do not expect any material impact related to open tax years; however, actual settlements may differ from amounts accrued. As of December 31, 2023, we had $20.1 million of unrecognized tax benefits and related interest and penalties, all of which would affect our effective tax rate if recognized. In the unlikely event these unrecognized tax benefits and related interest and penalties were recognized fully in 2023, the impact to the annual effective tax rate would have been 4.9 percent. We are not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefit will significantly increase or decrease in the next 12 months. The total liability for unrecognized tax benefits is expected to decrease by approximately $1.2 million in the next 12 months due to lapsing of statutes. We recognize interest and penalties related to uncertain tax positions in the provision for income taxes. During the years ended December 31, 2023, 2022, and 2021, we recognized approximately $0.7 million, $0.6 million, and $0.9 million in interest and penalties, respectively. We had approximately $3.2 million and $3.9 million for the payment of interest and penalties related to uncertain tax positions accrued within noncurrent income taxes payable as of December 31, 2023 and 2022, respectively. These amounts are not included in the reconciliation above. The components of the provision for income taxes consist of the following for the years ended December 31 (in thousands):
| 2023 |  | 2022 |  | 2021
Tax provision: |  |  |  |  |
Federal | $ | 55,149 |  |  | $ | 153,349 |  |  | $ | 165,218 |
State | 4,014 |  |  | 33,309 |  |  | 36,718 |
Foreign | 62,426 |  |  | 97,147 |  |  | 85,654 |
| 121,589 |  |  | 283,805 |  |  | 287,590 |
Deferred provision (benefit): |  |  |  |  |
Federal | (32,820) |  |  | (44,133) |  |  | (90,960) |
State | 6,223 |  |  | (7,848) |  |  | (16,176) |
Foreign | (10,935) |  |  | (5,583) |  |  | (2,408) |
| (37,532) |  |  | (57,564) |  |  | (109,544) |
Total provision | $ | 84,057 |  |  | $ | 226,241 |  |  | $ | 178,046 |
A reconciliation of the provision for income taxes using the statutory federal income tax rate to our effective income tax rate for the years ended December 31, is as follows:
| 2023 |  | 2022 |  | 2021
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit | 2.1 |  |  | 2.1 |  |  | 1.7 |
Section 199 deduction | 4.7 |  |  | — |  |  | — |
Share-based payment awards | (2.2) |  |  | (1.1) |  |  | (0.6) |
Excess foreign tax credits | (9.5) |  |  | (1.2) |  |  | (0.4) |
Other U.S. tax credits and incentives | (3.4) |  |  | (2.0) |  |  | (3.3) |
Foreign | 6.7 |  |  | 0.6 |  |  | (1.2) |
Other | 1.1 |  |  | — |  |  | 0.2 |
Effective income tax rate | 20.5 | % |  | 19.4 | % |  | 17.4 | %
Deferred tax assets (liabilities) are comprised of the following as of December 31 (in thousands):
| 2023 |  | 2022
Deferred tax assets: |  |  |
Lease liabilities | $ | 74,495 |  |  | $ | 79,402 |
Compensation | 64,788 |  |  | 69,305 |
Accrued expenses | 33,720 |  |  | 52,416 |
Tax credit carryforward | 14,485 |  |  | — |
Foreign affiliate prepayment | — |  |  | 1,901 |
Foreign net operating loss carryforwards(1) | 67,816 |  |  | 64,434 |
Long-lived assets | 104,005 |  |  | 94,268 |
Other(1) | 22,220 |  |  | 16,364 |
Total deferred tax assets (before valuation allowance) | 381,529 |  |  | 378,090 |
Less: valuation allowance(1) | (62,183) |  |  | (56,808) |
Total deferred tax assets | 319,346 |  |  | 321,282 |
Deferred tax liabilities: |  |  |
Right-of-use assets | (68,764) |  |  | (74,507) |
Intangible assets | (25,773) |  |  | (53,580) |
Prepaid assets | (4,405) |  |  | (6,657) |
Foreign withholding tax | (10,313) |  |  | (9,709) |
Other | (8,649) |  |  | (9,483) |
Total deferred tax liabilities | (117,904) |  |  | (153,936) |
Net deferred tax assets | $ | 201,442 |  |  | $ | 167,346 |
________________________________ (1) The amounts as of December 31, 2022 have been adjusted to conform to current year presentation. We had foreign net operating loss carryforwards with a tax effect of $67.8 million as of December 31, 2023, and $64.4 million as of December 31, 2022. The net operating loss carryforwards will expire at various dates from 2024 to 2030, with certain jurisdictions having indefinite carryforward terms. We continually monitor and review the foreign net operating loss carryforwards to determine the ability to realize the deferred tax assets associated with the foreign net operating loss carryforwards. As of December 31, 2023 and 2022, we have recorded a valuation allowance of $62.2 million and $56.8 million, respectively, against the deferred tax asset related to the foreign operating loss carryforwards that are primarily in Luxembourg.

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