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Note 15 - Income Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
15. | Income Taxes
The Company’s provision for income taxes consists of the following:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 105,236 |  |  | $ | 62,714 |  |  | $ | 41,686 |
State |  |  | 21,295 |  |  |  | 13,071 |  |  |  | 4,211 |
Foreign |  |  | 10,536 |  |  |  | 1,974 |  |  |  | 2,660 |
|  |  | 137,067 |  |  |  | 77,759 |  |  |  | 48,557 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 10,518 |  |  |  | 20,452 |  |  |  | 19,393 |
State |  |  | (3,728 | ) |  |  | 1,243 |  |  |  | 1,390 |
Foreign |  |  | (7,863 | ) |  |  | (1,197 | ) |  |  | (1,263 | )
|  |  | (1,073 | ) |  |  | 20,498 |  |  |  | 19,520 |
Change in valuation allowance |  |  | (1,037 | ) |  |  | 716 |  |  |  | (778 | )
Provision for income taxes |  | $ | 134,957 |  |  | $ | 98,973 |  |  | $ | 67,299 |
The Company files U.S. federal, U.S. state and foreign jurisdiction tax returns which are subject to examination up to the expiration of the statute of limitations. The Company believes the tax positions taken on its returns would be sustained upon an exam, or where a position is uncertain, adequate reserves have been recorded. As of December 31, 2021, the Company is no longer subject to income tax examinations for United States federal income taxes for tax years prior to 2018. Due to the carryforward of net operating losses and research & development credits, the Company’s Wisconsin state income tax returns for tax years 2007 through 2020 remain open. In addition, the Company is subject to audit by various foreign taxing jurisdictions for tax years 2009 through 2020. The Company is regularly under tax return examination by tax authorities in the various jurisdictions in which we operate. The Company is actively managing the examinations and working to address any open matters. While the Company does not believe any material taxes or penalties are due, there is a possibility that the ultimate tax outcome of an examination may result in differences from what was recorded. Such differences may affect the provision for income taxes in the period in which the determination is made, and could impact the Company’s financial results. Significant components of deferred tax assets and liabilities are as follows:
|  | December 31, |
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued expenses |  | $ | 37,797 |  |  | $ | 24,358 |
Deferred revenue |  |  | 27,003 |  |  |  | 15,851 |
Inventories |  |  | 14,907 |  |  |  | 11,795 |
Stock-based compensation |  |  | 10,202 |  |  |  | 8,348 |
Operating loss and credit carryforwards |  |  | 68,368 |  |  |  | 31,275 |
Bad debt |  |  | 1,253 |  |  |  | 1,633 |
Other |  |  | 12,203 |  |  |  | 8,558 |
Valuation allowance |  |  | (7,874 | ) |  |  | (5,740 | )
Total deferred tax assets |  |  | 163,859 |  |  |  | 96,078 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Goodwill and intangible assets |  |  | 328,162 |  |  |  | 171,831 |
Depreciation |  |  | 21,340 |  |  |  | 33,716 |
Debt refinancing costs |  |  | 2,916 |  |  |  | 3,544 |
Prepaid expenses |  |  | 1,664 |  |  |  | 1,259 |
Total deferred tax liabilities |  |  | 354,082 |  |  |  | 210,350 |
Net deferred tax liabilities |  | $ | (190,223 | ) |  | $ | (114,272 | )
As of December 31, 2021 and 2020, deferred tax assets of $15,740 and $1,497, and deferred tax liabilities of $205,964 and $115,769, respectively, were reflected on the consolidated balance sheets. The Company maintains a valuation allowance against the deferred tax assets when it is uncertain it will generate sufficient taxable income to utilize the asset. During 2021, the valuation allowance increased by $2,134 primarily due to foreign net operating losses which are unlikely to be utilized, partially offset by utilization of loss carryforwards in certain domestic and foreign subsidiaries. At December 31, 2021, the Company had state manufacturing tax credit carryforwards of approximately $28,270, which expire between 2028 and 2035. The Company believes it will generate sufficient taxable income in these jurisdictions to fully utilize the credits prior to their expiration. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows:
|  | December 31, |
|  | 2021 |  |  | 2020 |
Unrecognized tax benefit, beginning of period |  | $ | 7,613 |  |  | $ | 6,720 |
Increase in unrecognized tax benefit for positions taken in prior period |  |  | 272 |  |  |  | 332 |
Increase in unrecognized tax benefit for positions taken in current period |  |  | 990 |  |  |  | 750 |
Statute of limitation expirations |  |  | (228 | ) |  |  | (189 | )
Settlements |  |  | - |  |  |  | - |
Unrecognized tax benefit, end of period |  | $ | 8,647 |  |  | $ | 7,613 |
The unrecognized tax benefit as of December 31, 2021 and 2020, if recognized, would favorably impact the effective tax rate. As of December 31, 2021 and 2020, total accrued interest of approximately $127 and $95, respectively, and accrued penalties of approximately $357 and $274, respectively, associated with net unrecognized tax benefits are included in the consolidated balance sheets. Interest and penalties are recorded as a component of income tax expense. The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2022. A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2021, 2020 and 2019 are as follows:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State taxes |  |  | 4.3 |  |  |  | 4.3 |  |  |  | 4.3 |
State tax rate differential |  |  | 0.0 |  |  |  | 0.0 |  |  |  | (1.0 | )
Research and development credits |  |  | (1.0 | ) |  |  | (1.1 | ) |  |  | (0.8 | )
State credits |  |  | (1.1 | ) |  |  | (1.5 | ) |  |  | (1.0 | )
Share-based compensation |  |  | (3.8 | ) |  |  | (1.0 | ) |  |  | (0.6 | )
Nondeductible U.S. compensation |  |  | 1.5 |  |  |  | 0.0 |  |  |  | 0.0 |
Foreign tax deduction |  |  | (1.5 | ) |  |  | 0.0 |  |  |  | 0.0 |
Foreign deferred tax rate change |  |  | 1.2 |  |  |  | 0.0 |  |  |  | 0.0 |
Other |  |  | (1.1 | ) |  |  | 0.5 |  |  |  | (0.8 | )
Effective tax rate |  |  | 19.5 | % |  |  | 22.2 | % |  |  | 21.1 | %

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