On August 9, 2022 President Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act into law, which includes an advanced manufacturing investment tax credit, among other provisions. On August 16, 2022 President Biden signed the Inflation Reduction Act (the IRA) into law, which includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and tax incentives for energy and climate initiatives, among other provisions. Based on the Company’s review, these new laws do not result in a material change to the Company’s income tax provision for 2022.

On November 18, 2022, the U.S. Treasury Department and IRS (collectively, “Treasury”) released proposed regulations that provide additional guidance relating to the foreign tax credit (“FTC”). The 2022 Proposed Regulations include guidance with respect to the reattribution asset rule for purposes of allocating and apportioning foreign taxes, the cost recovery requirement, and the attribution rule for withholding taxes on royalty payments. These Proposed Regulations would, if finalized, supplement and revise Final Regulations that were published on January 4, 2022. The Company has assessed the impact of the January 4, 2022, Final Regulations and has included the impact in its provision for income taxes. The Company does not expect any material impact to its consolidated financial statements from the issuance of the Proposed Regulations.

The following table presents the components of our income from continuing operations before income taxes (in thousands):

The income tax expense (benefit) attributable to income from continuing operations for the years ended December 31, 2022, December 31, 2021, and December 31, 2020 consists of the following (in thousands):

	2022			2021			2020
Current
Federal	$	21,323		$	653		$	15,663
State		9,946			6,830			9,024
Foreign		9,232			19,621			16,534
Total current income tax expense		40,501			27,104			41,221
Deferred
Federal		(2,902	)		1,624			(186	)
State		(623	)		(1,263	)		(1,785	)
Foreign		2,681			(3,829	)		3,242
Total deferred tax expense (benefit)		(844	)		(3,468	)		1,271
Total income tax expense	$	39,657		$	23,636		$	42,492

Income tax expense (benefit) was different from the amount computed by applying the United States federal statutory rate to pre-tax income from continuing operations as a result of the following (in thousands):

	2022					2021					2020
Income before income tax expense	$	166,222				$	112,588				$	161,413
Tax at federal statutory tax rate		34,907		21.0	%		23,644		21.0	%		33,897		21.0	%
State taxes, net of federal tax benefit		7,530		4.5	%		4,192		3.7	%		4,838		3.0	%
Change in tax status		—		0.0	%		—		0.0	%		3,897		2.4	%
Change in valuation allowance		1,363		0.8	%		3,865		3.4	%		6,850		4.2	%
Change in uncertain tax positions		1,688		1.0	%		(80	)	-0.1	%		883		0.6	%
Foreign tax rate differential		(1,787	)	-1.1	%		(388	)	-0.3	%		(128	)	-0.1	%
Tax cost of foreign operations, net of credits		777		0.5	%		(5,151	)	-4.6	%		(47	)	0.0	%
Transaction costs		—		0.0	%		540		0.5	%		61		0.0	%
Noncontrolling interests		(6,279	)	-3.8	%		(5,225	)	-4.6	%		(4,280	)	-2.6	%
Federal business credits		(1,926	)	-1.2	%		(2,538	)	-2.2	%		(2,206	)	-1.4	%
Executive compensation		1,921		1.2	%		2,352		2.1	%		80		0.0	%
Other, net		1,463		0.9	%		2,425		2.1	%		(1,353	)	-0.9	%
Total income tax expense	$	39,657		23.9	%	$	23,636		21.0	%	$	42,492		26.3	%

The effective tax rate in 2022 increased to 23.9% from 21.0% in 2021. The change in the effective tax rate was due primarily to a net increase of uncertain tax positions during 2022, an income tax benefit recognized in 2021 for foreign tax credits which did not reoccur in 2022, partially offset by a decrease in withholding taxes, a benefit from a change in jurisdictional mix of earnings, and a tax expense recognized in 2021 related to a nonrecurring write down of a foreign tax receivable.

The effective tax rate in 2021 decreased to 21.0% from 26.3% in 2020. The change in the effective tax rate was due primarily to an increase in untaxed income attributable to noncontrolling interests, foreign tax credits utilized on the 2020 federal return, a change in jurisdictional earnings, and a release of uncertain tax positions, partially offset by a write down of a foreign tax receivable and an increase in executive compensation subject to IRC Section 162(m) limitations.

The effective tax rate for the year ended December 31, 2022 differs from the federal statutory tax rate primarily due to state income taxes and a recorded valuation allowance on foreign tax credit

carryovers, partially offset by benefits related to income attributable to noncontrolling interests, earnings in lower tax jurisdictions and federal business tax credits.

The effective tax rate for the year ended December 31, 2021 differs from the federal statutory tax rate primarily due to state income taxes, a recorded valuation allowance on foreign tax credit carryovers, a write down of a foreign tax receivable, and an increase in executive compensation subject to IRC Section 162(m) limitations, partially offset by benefits related to untaxed income attributable to noncontrolling interests, release of uncertain tax positions, and federal business tax credits.

The components of deferred tax assets and liabilities consists of the following at December 31, 2022 and December 31, 2021 (in thousands):

	2022			2021
Deferred tax assets
Project and non-project reserves	$	20,862		$	24,668
Employee compensation and benefits		55,103			60,397
Revenue and cost recognition		43,629			28,930
Insurance accruals		14,067			16,661
Net operating losses		8,928			11,589
Lease liabilities		44,285			54,926
Tax credit carryforwards		22,333			21,818
Other		3,847			3,323
Total deferred tax assets		213,054			222,312
Valuation allowance		(28,705	)		(27,348	)
Total deferred tax assets		184,349			194,964
Deferred tax liabilities
Intangible assets		(12,131	)		(16,542	)
Right-of-use assets		(40,111	)		(48,993	)
Other		(6,868	)		(6,436	)
Total deferred tax liabilities		(59,110	)		(71,971	)
Net deferred tax asset	$	125,239		$	122,993

The Company assesses the realizability of its deferred tax assets each reporting period through an analysis of potential sources of taxable income, including prior year taxable income available to absorb carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine if a valuation allowance against deferred tax assets is required. A valuation allowance is recorded against deferred tax assets to reflect the amount of deferred tax assets that is determined to be more-likely-than-not to be realized.

The Company is not asserting that any of the earnings of the foreign subsidiaries will be permanently reinvested. Therefore, the Company has recorded a deferred tax liability for the undistributed earnings net of applicable foreign tax credits.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to currently deduct research and development expenditures in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes. This provision resulted in additional cash tax liability for the 2022 tax year of approximately $16 million. Correspondingly, our deferred tax asset for revenue and cost recognition increased by approximately $16 million to reflect future amortization deductions of the capitalized expenses.

As of December 31, 2022, and December 31, 2021, the Company’s valuation allowance against deferred tax assets was $28.7 million and $27.3 million, respectively. The Company has recorded a valuation allowance against certain tax attributes that the Company has determined are not more-likely-than-not to be realized, including certain foreign net operating loss carryforwards, foreign tax credit carryforwards, and capital loss carryforwards. From December 31, 2021 to December 31, 2022, the Company’s valuation allowance increased by $1.4 million. This increase relates to deferred tax assets recorded for foreign tax credit carryforwards, offset in part by a decrease related to net operating loss carryforwards. The valuation allowance is recorded because the Company does not expect to have sufficient taxable income and foreign source income to support the net operating loss carryforwards and the foreign tax credit carryforwards before they expire.

As of December 31, 2022, the Company has NOLs of $0.4 million, $30.6 million, and $30.2 million for U.S. Federal, U.S. states and foreign jurisdictions, respectively. The utilization of the U.S. federal and U.S. state NOLs are subject to certain annual limitations. Of these NOL amounts, $0 million, $20.1 million and $19.3 million in U.S. Federal, U.S. states and foreign jurisdictions, respectively, do not expire. The remaining amounts of NOLs in U.S. states and in foreign jurisdictions will expire if not used between 2023 and 2043.

As of December 31, 2022, the Company has foreign tax credit carryforwards of $22.3 million. The Company has provided a valuation allowance of $22.3 million as the Company considers it is not more likely than not that these credits will be realized. These foreign tax credits start expiring in the year 2029.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (in thousands):

	2022			2021			2020
Beginning of year	$	21,181		$	16,395		$	15,526
Increases—current year tax positions		4,666			6,203			950
Increases—prior year tax positions		2,254			1,512			1,951
Decreases—prior year tax positions		(3,537	)		(2,929	)		(1,366	)
Settlements		(1,447	)		—			(666	)
Lapse of statute of limitations		(319	)		—			—
End of year	$	22,798		$	21,181		$	16,395

At December 31, 2022, and December 31, 2021, there are $21.8 million and $19.5 million of unrecognized tax benefits that if recognized would affect the Company’s effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits as part of its income tax expense. During the years ended December 31, 2022, December 31, 2021, and December 31, 2020, the Company recognized approximately $0.7 million, $(0.9) million, and $1.1 million in interest and penalties, respectively, in the consolidated statements of income. The total amount of interest and penalties accrued in the consolidated balance sheets was $4.1 million, $3.5 million, and $4.4 million at December 31, 2022, December 31, 2021, and December 31, 2020, respectively.

The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. The Company is subject to examination by tax authorities in several jurisdictions, including major jurisdictions such as Canada, Qatar, Saudi Arabia and the United States. As of December 31, 2022, the Company’s U.S. federal income tax returns for tax years 2019 and forward remain subject to examination. U.S. states and foreign income tax returns remain subject to examination based on varying local statutes of limitations.

The Company estimates that, within 12 months, it may decrease its uncertain tax positions by approximately $2.5 million as a result of concluding various tax audits and closing tax years.

Although the Company believes its reserves for its tax positions are reasonable, the final outcome of tax audits could be significantly different, both favorably and unfavorably. It is reasonably possible that these audits may conclude in the next 12 months and that the unrecognized tax benefits the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. However, it is not currently possible to estimate the amount, if any, of such change.