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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The federal and state and foreign income tax provision is summarized as follows: 
Year Ended December 31,202120202019
Current
Federal$120,939 $92,649 $100,986 
State24,492 21,479 19,902 
Foreign9,480 8,256 11,722 
154,911 122,384 132,610 
Deferred
Federal(7,106)(701)(1,635)
State(735)(275)(960)
Foreign10 — — 
(7,831)(976)(2,595)
Total income taxes$147,080 $121,408 $130,015 
Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues raised may differ materially from the amount accrued. The examination and the resolution process may last longer than one year.
The components of Income before income taxes are summarized as follows:
Year Ended December 31,202120202019
Domestic$641,403 $517,451 $565,842 
Foreign52,270 51,243 65,599 
$693,673 $568,694 $631,441 

The Company's foreign income is primarily earned in Canada, the Republic of Ireland and the United Kingdom.
The effective income tax rate differs from the federal income tax statutory rate due to the following:
Year Ended December 31,202120202019
Statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal tax benefit2.6 3.0 2.4 
Foreign tax expense and tax rate differential(0.1)(0.4)— 
Tax benefit from stock option exercises(1.2)(1.1)(1.9)
Research and development tax credit(1.0)(1.0)(1.1)
Foreign-Derived Intangible Income Deduction (FDII)(0.2)(0.3)(0.2)
Other, net0.1 0.1 0.4 
21.2 %21.3 %20.6 %
The increase in the Company's effective rate in 2020 was primarily due to reduced tax benefits related to the lower volume of stock option exercises as compared to the prior year and an increase in the Company's state effective tax rate partially offset by a decrease in foreign tax expense mainly related to a one time change in method for the Global Intangible Low Taxed Income (GILTI).
Deferred income taxes for 2021 and 2020 reflect the impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Significant components of deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows:
20212020
Deferred Tax Assets:
Stock-based compensation expense$32,087 $26,893 
Federal net operating loss carryforward7,280 — 
State net operating loss carryforward 58,927 65,114 
Foreign net operating loss carryforward and other6,402 6,634 
Basis differences in investments2,590 3,965 
Federal benefit of state tax deduction for uncertain tax positions1,842 2,255 
Revenue and expense recognized in different periods for financial reporting and income tax purposes1,484 3,025 
Other assets
2,656 1,584 
Total deferred income tax assets113,268 109,470 
Less: Federal net operating loss valuation allowance(1,453)— 
Less: State net operating loss valuation allowance(56,004)(62,229)
Less: Foreign net operating loss valuation allowance(6,342)(6,547)
Net deferred income tax assets$49,469 $40,694 
Deferred Tax Liabilities:
Capitalized software currently deductible for tax purposes, net of amortization$(57,123)$(63,588)
Difference in financial reporting and income tax depreciation methods(9,592)(11,422)
Difference between book and tax basis of other assets(7,179)(5,747)
Goodwill and other intangibles (11,690)(2,462)
Foreign dividend withholding tax— — 
Capitalized contract costs(8,347)(7,762)
Other liabilities(1,431)(1,900)
Total deferred income tax liabilities$(95,362)$(92,881)
Net deferred income tax liabilities$(45,893)$(52,187)
As a result of the Company's acquisition of Novus Partners in November 2021, the Company acquired federal operating loss carryovers of $28,285 as well as research and development credit carryovers of $1,340. The Company has recorded
a deferred tax asset associated with these carryovers of $7,280 and a related valuation allowance of $1,454 associated with the statutory limitations of the carryforwards. Operating loss carryovers generated after December 31, 2017 have an indefinite carryforward period, while those generated before December 31, 2017 will expire beginning in 2033 through 2037. See Note 14 for more information related to the acquisition of Novus Partners.
The valuation allowances against deferred tax assets at December 31, 2021 and 2020 are related to federal and state net operating losses from certain domestic subsidiaries, foreign net operating losses from certain foreign subsidiaries and the restriction of the use of the foreign tax credits. Internal Revenue Code Section 382 places an annual limitation on the amount of operating losses and tax credits an acquiring entity can use of operating loss and tax credit carryforwards of acquired entities. Certain state and foreign tax statutes significantly limit the utilization of net operating losses for domestic and foreign subsidiaries. Furthermore, these net operating losses cannot be used to offset the net income of other subsidiaries.
The Company recognizes uncertain tax positions in accordance with the applicable accounting guidance and adjusts these liabilities when management’s judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company's current estimate of the tax liabilities. The Company’s total unrecognized tax benefit, including interest and penalties, as of December 31, 2021 was $16,224, of which $14,382 would affect the effective tax rate if the Company were to recognize the tax benefit. The gross amount of uncertain tax liability of $4,253 is expected to be paid within one year is netted against the current payable account while the remaining amount of $11,972 is included in Other long-term liabilities on the accompanying Consolidated Balance Sheet. During the year ended December 31, 2021, the Company recognized $4,782 of previously unrecognized tax benefits relating to the lapse of the statute of limitation and settlements.
The Company files a consolidated federal income tax return and separate income tax returns with various states. Certain subsidiaries of the Company file tax returns in foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examination for years before 2018 and is no longer subject to state, local or foreign income tax examinations by authorities for years before 2015.
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
202120202019
Balance as of January 1$15,911 $15,356 $14,367 
Tax positions related to current year:
Gross additions3,672 3,352 3,054 
Tax positions related to prior years:
Gross additions382 236 1,465 
Settlements(678)— (145)
Lapses on statute of limitations(4,401)(3,033)(3,385)
Balance as of December 31$14,886 $15,911 $15,356 
The above reconciliation of the gross unrecognized tax benefit will differ from the amount which would affect the effective tax rate because of the recognition of the federal and state tax benefits and interest and penalties.
The Company classifies all interest and penalties as income tax expense. The Company has recorded $1,338, $2,105 and $1,962 in liabilities for tax-related interest and penalties in 2021, 2020 and 2019, respectively.
The Company estimates it will recognize $4,253 of unrecognized tax benefits within the next twelve months due to lapses on the statute of limitation.
The Company includes its direct and indirect subsidiaries in its U.S. consolidated federal income tax return. The Company’s tax sharing allocation agreement provides that any subsidiary having taxable income will pay a tax liability equivalent to what that subsidiary would have paid if it filed a separate income tax return. If the separately calculated federal income tax provision for any subsidiary results in a tax loss, the current benefit resulting from such loss, to the extent utilizable on a separate return basis, is accrued and paid to that subsidiary.