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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

6) INCOME TAXES

Components of income tax expense/(benefit) are as follows (amounts in thousands):

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

178,666

 

 

$

276,471

 

 

$

268,974

 

Foreign

 

 

14,740

 

 

 

13,754

 

 

 

13,978

 

State

 

 

33,423

 

 

 

44,993

 

 

 

43,333

 

 

 

 

226,829

 

 

 

335,218

 

 

 

326,285

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

(9,935

)

 

 

(26,638

)

 

 

(20,382

)

Foreign

 

 

(1,509

)

 

 

1,521

 

 

 

(2,496

)

State

 

 

(6,107

)

 

 

(4,420

)

 

 

(4,114

)

 

 

 

(17,551

)

 

 

(29,537

)

 

 

(26,992

)

Total

 

$

209,278

 

 

$

305,681

 

 

$

299,293

 

Our provision for income taxes for the years ended December 31, 2022, 2021 and 2020 included tax expenses of $1 million, tax benefits of $2 million and tax expenses of $7 million, respectively, related to employee share-based payments. Excess tax benefits (when the deductible amount related to the settlement of employee equity awards for tax purposes exceeds the cumulative compensation cost recognized for financial reporting purposes) and deficiencies, if applicable, are recorded as a component of our tax provision.

The foreign provision for income taxes is based on foreign pre-tax earnings of $76 million in 2022, $79 million in 2021 and $72 million in 2020. In the future, we anticipate repatriating only previously taxed foreign earnings subjected as well as any future earnings that would qualify for a full dividend received deduction for distributions post-December 31, 2017. As of December 31, 2022, the amount of previously taxed earnings and earnings that would qualify for a full dividend received deduction total $109 million. At this time, there are no material tax effects related to future cash repatriation of undistributed foreign earnings. As such, we have not recognized a deferred tax liability related to existing undistributed earnings

On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act of 2022 (“the Act”). The Act includes tax provisions, among other things, which implements (i) a 15 percent minimum tax on book income of certain large corporations; (ii) a one percent excise tax on net stock repurchases; and (iii) several tax incentives to promote clean energy. We do not expect the Act to have a material impact on our income tax provision.

A reconciliation between the federal statutory rate and the effective tax rate is as follows:

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Federal statutory rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

State taxes, net of federal income tax benefit

 

 

2.4

%

 

 

2.5

%

 

 

2.5

%

Tax effects of foreign operations

 

 

-0.3

%

 

 

-0.1

%

 

 

-0.3

%

Tax benefit from settlement of employee equity awards

 

 

0.1

%

 

 

-0.2

%

 

 

0.5

%

Other items

 

 

0.5

%

 

 

0.3

%

 

 

0.4

%

Impact of income attributable to noncontrolling interests

 

 

0.5

%

 

 

0.1

%

 

 

-0.2

%

Effective tax rate

 

 

24.2

%

 

 

23.6

%

 

 

23.9

%

Our effective tax rates were 24.2%, 23.6% and 23.9% for the years ended December 31, 2022, 2021 and 2020, respectively. The increase in our effective tax rate for the year ended December 31, 2022, as compared to 2021, is due primarily to the decrease in net income attributable to noncontrolling interests during 2022, as compared to 2021. The decrease in our effective tax rate for the year ended December 31, 2021, as compared to 2020, is due primarily to the tax benefit of $2 million recorded during 2021, and the tax expense of $7 million recorded during 2020, resulting from employee share-based payments.

Included in “Other current assets” on our Consolidated Balance Sheet are prepaid federal, state and foreign income taxes amounting to approximately $17 million and $6 million as of December 31, 2022 and 2021, respectively.

The components of deferred taxes are as follows (amounts in thousands):

 

 

Year Ended December 31,

 

 

 

2022

 

 

 

2021

 

 

 

Assets

 

 

 

Liabilities

 

 

 

Assets

 

 

 

Liabilities

 

Self-insurance reserves

$

 

103,528

 

 

$

 

 

 

$

 

97,024

 

 

$

 

 

Compensation accruals

 

 

77,269

 

 

 

 

 

 

 

 

77,917

 

 

 

 

 

Doubtful accounts and other reserves

 

 

141,511

 

 

 

 

 

 

 

 

127,876

 

 

 

 

 

Other currently non-deductible accrued liabilities

 

 

12,520

 

 

 

 

 

 

 

 

31,240

 

 

 

 

 

Depreciable and amortizable assets

 

 

 

 

 

 

281,203

 

 

 

 

 

 

 

 

303,079

 

Operating lease liabilities

 

 

108,704

 

 

 

 

 

 

 

 

86,652

 

 

 

 

 

Right of use assets-operating leases

 

 

 

 

 

 

106,675

 

 

 

 

 

 

 

 

86,269

 

State and foreign net operating loss carryforwards and other state and foreign deferred tax assets

 

 

80,823

 

 

 

 

 

 

 

 

79,499

 

 

 

 

 

Net pension liabilities – OCI only

 

 

1,702

 

 

 

 

 

 

 

 

1,014

 

 

 

 

 

Other liabilities

 

 

 

 

 

 

6,457

 

 

 

 

 

 

 

 

3,811

 

 

$

 

526,057

 

 

$

 

394,335

 

 

$

 

501,222

 

 

$

 

393,159

 

Valuation Allowance

 

 

(63,325

)

 

 

 

0

 

 

 

 

(62,356

)

 

 

 

0

 

Total deferred income taxes

$

 

462,732

 

 

$

 

394,335

 

 

$

 

438,866

 

 

$

 

393,159

 

At December 31, 2022, state net operating loss carryforwards (losses originating in tax years beginning prior to January 1, 2022, expiring in years 2023 through 2040), and credit carryforwards available to offset future taxable income approximated $890 million representing approximately $58 million in deferred state tax benefit (net of the federal benefit); and state related interest expense carryforwards approximated $170 million representing approximately $8 million in deferred state tax benefit (net of the federal benefit). At December 31, 2022, there were foreign net operating losses and interest expense carryforwards of approximately $49 million, most of which are carried forward indefinitely, representing approximately $12 million in deferred foreign tax benefit. At December 31, 2022, related to the acquisition of Riverside Medical Clinic Patient Services, LLC, there were federal net operating losses of approximately $10 million carried forward indefinitely for federal purposes representing approximately $2 million in deferred federal tax benefits.

A valuation allowance is required when it is more likely than not that some portion of the deferred tax assets will not be realized. Based on available evidence, it is more likely than not that certain of our state tax benefits will not be realized. Therefore, valuation allowances of approximately $59 million and $57 million have been reflected as of December 31, 2022 and 2021, respectively. During 2022, the valuation allowance on these state tax benefits increased by $2 million primarily due to additional state related interest expense carryforwards. In addition, valuation allowances of approximately $4 million and $5 million have been reflected as of December 31, 2022 and 2021, respectively, related to foreign net operating losses and credit carryforwards.

During 2022 and 2021, the estimated liabilities for uncertain tax positions (including accrued interest and penalties) were increased less than $1 million due to tax positions taken in the current and prior years. The balance at each of the years ended December 31, 2022 and 2021, if subsequently recognized, that would favorably affect the effective tax rate and the provision for income taxes is approximately $2 million as of each date.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. As of December 31, 2022 and 2021, we have accrued interest and penalties of less than $1 million as of each date. The U.S. federal statute of limitations remains open for the 2019 and subsequent years. Foreign and U.S. state and local jurisdictions have statutes of limitations generally ranging for 3 to 4 years. The statute of limitations on certain jurisdictions could expire within the next twelve months. It is reasonably possible that the amount of unrecognized tax benefits will change during the next 12 months, however, it is anticipated that any such change, if it were to occur, would not have a material impact on our results of operations.

The tabular reconciliation of unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020 is as follows (amounts in thousands):

 

 

 

As of December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

Balance at January 1,

 

$

2,544

 

 

$

2,806

 

 

$

2,164

 

Additions based on tax positions related to the current year

 

 

500

 

 

 

500

 

 

 

500

 

Additions for tax positions of prior years

 

 

159

 

 

 

213

 

 

 

142

 

Reductions for tax positions of prior years

 

 

(461

)

 

 

(261

)

 

 

0

 

Settlements

 

 

(15

)

 

 

(714

)

 

 

0

 

Balance at December 31,

 

$

2,727

 

 

$

2,544

 

 

$

2,806