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Income Taxes
 9 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The gross liability for unrecognized tax benefits at September 30, 2022 and December 31, 2021 was $17,718 and $14,887, respectively, exclusive of interest and penalties, of which $16,973 and $14,382 would affect the effective tax rate if the Company were to recognize the tax benefit.
The Company classifies interest and penalties on unrecognized tax benefits as income tax expense. As of September 30, 2022 and December 31, 2021, the combined amount of accrued interest and penalties related to tax positions taken on tax returns was $1,458 and $1,338, respectively.
September 30, 2022December 31, 2021
Gross liability for unrecognized tax benefits, exclusive of interest and penalties$17,718 $14,887 
Interest and penalties on unrecognized benefits1,458 1,338 
Total gross uncertain tax positions$19,176 $16,225 
Amount included in Current liabilities$4,190 $4,253 
Amount included in Other long-term liabilities14,986 11,972 
$19,176 $16,225 
The effective income tax rate for the three and nine months ended September 30, 2022 and 2021 differs from the federal income tax statutory rate due to the following:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Statutory rate21.0 %21.0 %21.0 %21.0 %
State taxes, net of federal tax benefit3.4 2.5 2.9 3.0 
Foreign tax expense and tax rate differential(0.2)(0.1)(0.1)(0.1)
Tax benefit from stock option exercises(1.1)(0.6)(0.5)(1.0)
State settlements — (0.3)— (0.2)
Provision-to-return adjustment— (0.5)— (0.2)
Other, net(0.1)(0.3)(0.2)(0.3)
23.0 %21.7 %23.1 %22.2 %
The increase in the Company's effective tax rate for the three months ended September 30, 2022 was primarily due to an increase in the state effective tax rate and one-time state settlements which reduced the effective rate in 2021. Provision-to-return adjustments and statutory limitations which lowered the 2021 effective rate are expected to be realized in the fourth quarter of 2022. The increase was partially offset by increased tax benefits related to the stock option exercises as a percentage of net income in the third quarter of 2022 compared to the third quarter of 2021.
The increase in the Company's effective tax rate for the nine months ended September 30, 2022 was primarily due to decreased tax benefits related to the lower volume of stock option exercises in 2022 compared to the prior year period as well as the timing of one-time state settlements which reduced the effective rate in 2021. Provision-to-return adjustments and statutory limitations which lowered the 2021 effective rate for the nine month period are expected to be realized in the fourth quarter of 2022.
The Company files income tax returns in the United States on a consolidated basis and in many U.S. state and foreign jurisdictions. The Company is subject to examination of income tax returns by the Internal Revenue Service (IRS) and other domestic and foreign tax authorities. 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.
The Company estimates it will recognize $4,190 of gross unrecognized tax benefits. This amount is expected to be paid within one year or to be removed at the expiration of the statute of limitations and resolution of income tax audits and is netted against the current payable account. These unrecognized tax benefits are related to tax positions taken on certain federal, state, and foreign tax returns. However, the timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. While it is reasonably possible that some issues under examination could be resolved in the next twelve months, based upon the current facts and circumstances, the Company cannot reasonably
estimate the timing of such resolution or the total range of potential changes as it relates to the current unrecognized tax benefits that are recorded as part of the Company’s financial statements.
On July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, making significant changes to the corporate income tax rate. The bill reduces the corporate income tax rate from 9.99% to 4.99% with reductions occurring in phases beginning each tax year from January 1, 2023 through January 1, 2031. U.S. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. The Company is currently evaluating the enactment of this law but does not expect the impact on its consolidated financial statements and related disclosures to be material.
On August 16, 2022, President Biden signed into law H.R. 5376, commonly referred to as the Inflation Reduction Act of 2022 (IRA). IRA introduces a new 15% corporate alternative minimum tax as well as a 1% excise tax on repurchases of stock by certain publicly traded corporations. Both of these provisions begin for tax years beginning after December 31, 2022. The Company is currently evaluating the enactment of IRA but does not expect the impact on its consolidated financial statements and related disclosures to be material.