XML 56 R21.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The federal and state and foreign income tax provision is summarized as follows: 
Year Ended December 31,202320222021
Current
Federal$133,465 $126,780 $120,939 
State23,621 27,267 24,492 
Foreign8,807 26,255 9,480 
165,893 180,302 154,911 
Deferred
Federal(29,837)(40,619)(7,106)
State(3,620)(4,949)(735)
Foreign(39)(921)10 
(33,496)(46,489)(7,831)
Total income taxes$132,397 $133,813 $147,080 
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 31,202320222021
Domestic$545,642 $474,894 $641,403 
Foreign49,013 134,386 52,270 
$594,655 $609,280 $693,673 
The Company's foreign income is primarily earned in Canada, the Republic of Ireland, Luxembourg and the United Kingdom.
The effective income tax rate differs from the federal income tax statutory rate due to the following:
Year Ended December 31,202320222021
Statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal tax benefit2.6 2.9 2.6 
Foreign tax expense and tax rate differential(0.3)(0.2)(0.1)
Tax benefit from stock option exercises(0.3)(0.7)(1.2)
Research and development tax credit(1.1)(1.1)(1.0)
Foreign-Derived Intangible Income Deduction (FDII)(0.3)(0.3)(0.2)
Other, net0.7 0.4 0.1 
22.3 %22.0 %21.2 %
The increase in the Company's effective rate in 2023 was primarily due to reduced tax benefits related to stock option exercises as compared to the prior year.
Deferred income taxes for 2023 and 2022 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, 2023 and 2022 are as follows:
20232022
Deferred Tax Assets:
Stock-based compensation expense$35,999 $35,865 
Federal net operating loss and R&D Credit carryforward5,477 6,565 
State net operating loss carryforward 39,820 40,249 
Foreign net operating loss carryforward and other7,486 7,339 
Capitalized research and development11,759 — 
Accrued expense associated with voluntary separation program3,796 9,792 
Basis differences in investments5,111 2,432 
Federal benefit of state tax deduction for uncertain tax positions2,039 1,891 
Revenue and expense recognized in different periods for financial reporting and income tax purposes2,306 2,827 
Other assets
2,509 4,021 
Total deferred income tax assets116,302 110,981 
Less: Federal net operating loss and R&D valuation allowance(794)(794)
Less: State net operating loss valuation allowance(36,966)(36,963)
Less: Foreign net operating loss valuation allowance(7,486)(7,339)
Net deferred income tax assets$71,056 $65,885 
Deferred Tax Liabilities:
Capitalized research and development$— $(24,764)
Difference in financial reporting and income tax depreciation methods(9,679)(12,694)
Difference between book and tax basis of other assets(7,652)(7,265)
Goodwill and other intangibles (6,784)(7,482)
Capitalized contract costs(9,232)(8,744)
Total deferred income tax liabilities$(33,347)$(60,949)
Net deferred income tax assets$37,709 $4,936 
The 2017 Tax Cut Job Act (Tax Act) enacted in December 2017 contained a provision which became effective for research and development expenditures incurred by the Company on or after January 1, 2022. Under the Tax Act, research and development costs incurred are no longer allowed as an immediate deduction for federal income tax purposes. Rather, these expenditures incurred must be capitalized and amortized over a five-year period for activities conducted in the United States or 15 years for activities conducted abroad. The Company recorded a deferred tax asset of $67,881 as of
December 31, 2023 associated with this provision of the Tax Act which reduced the Company's net deferred tax liabilities related to capitalized research and development expenditures.
As of December 31, 2023, the Company has federal operating loss carryovers of $19,880 remaining from the acquisition of Novus Partners as well as research and development credit carryovers remaining of $1,302. The Company has recorded a deferred tax asset associated with these carryovers of $5,477 and a related valuation allowance of $794 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.
The valuation allowances against deferred tax assets at December 31, 2023 and 2022 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, 2023 was $16,917, of which $14,878 would affect the effective tax rate if the Company were to recognize the tax benefit. The gross amount of uncertain tax liability of $3,837 is expected to be paid within one year and is netted against the current payable account while the remaining amount of $13,080 is included in Other long-term liabilities on the accompanying Consolidated Balance Sheet. During the year ended December 31, 2023, the Company recognized $3,383 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 2020 and is no longer subject to state, local or foreign income tax examinations by authorities for years before 2018.
A reconciliation of the beginning and ending amount of unrecognized tax benefit is as follows:
202320222021
Balance as of January 1$15,204 $14,886 $15,911 
Tax positions related to current year:
Gross additions3,395 3,481 3,672 
Tax positions related to prior years:
Gross additions120 251 382 
Settlements— — (678)
Lapses on statute of limitations(3,187)(3,414)(4,401)
Balance as of December 31$15,532 $15,204 $14,886 
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 $1,385, $1,118 and $1,338 in liabilities for tax-related interest and penalties in 2023, 2022 and 2021, respectively.
The Company estimates it will recognize $3,837 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.