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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes consists of:
Years Ended December 31, | 2022 |  | 2021 |  | 2020
United States | $ | 65,350 |  |  | $ | 101,353 |  |  | $ | 91,555 |
International | 269,354 |  |  | 220,302 |  |  | 209,600 |
Total | $ | 334,704 |  |  | $ | 321,655 |  |  | $ | 301,155 |
The provision (benefit) for income taxes is composed of:
Years Ended December 31, | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
U.S. Federal | $ | 12,791 |  |  | $ | 11,932 |  |  | $ | 9,934 |
State/Local | 2,265 |  |  | 4,917 |  |  | 3,094 |
International | 92,199 |  |  | 75,524 |  |  | 82,235 |
| $ | 107,255 |  |  | $ | 92,373 |  |  | $ | 95,263 |
Deferred: |  |  |  |  |
U.S. Federal/State | $ | (882) |  |  | $ | (11,168) |  |  | $ | (2,270) |
International | (11,224) |  |  | (3,188) |  |  | (5,928) |
| $ | (12,106) |  |  | $ | (14,356) |  |  | $ | (8,198) |
Total | $ | 95,149 |  |  | $ | 78,017 |  |  | $ | 87,065 |
A reconciliation of the provision for income taxes with the amount computed by applying the statutory federal income tax rate of 21% to income before provision for income taxes is as follows:
Years Ended December 31, | 2022 |  | 2021 |  | 2020
Income tax at statutory rate | $ | 70,288 |  |  | $ | 67,547 |  |  | $ | 63,243 |
State income taxes, net of federal tax effect | 1,475 |  |  | 1,616 |  |  | 2,396 |
Excess tax benefits from share-based compensation | (3,306) |  |  | (16,060) |  |  | (11,625) |
Deferred tax (benefits) charges, incl. tax rate changes | (2,349) |  |  | (1,040) |  |  | 4,110 |
U.S. Global Intangible Low-Taxed Income ("GILTI") and Base Erosion Anti-Abuse Tax ("BEAT") | 3,129 |  |  | — |  |  | (3,909) |
Valuation allowance | 1,486 |  |  | 4,485 |  |  | 1,332 |
Legal entity reorganization | 5,850 |  |  | — |  |  | — |
Rate differential on earnings of foreign operations | 19,165 |  |  | 20,831 |  |  | 24,901 |
Other items, net | (589) |  |  | 638 |  |  | 6,617 |
Actual income tax provision | $ | 95,149 |  |  | $ | 78,017 |  |  | $ | 87,065 |
Effective income tax rate | 28.4 | % |  | 24.3 | % |  | 28.9 | %
The 2022 effective tax rate of 28.4% includes a $5.9 million charge for taxes related to a legal entity reorganization intended to enhance our dividend and cash management capabilities. Excluding this impact, the effective tax rate was 26.7%. The provision for income tax is favorably impacted by excess tax benefits on deductible share-based compensation. The tax provision for 2022 reflects a $3.3 million benefit from this item compared with a $16.1 million and $11.6 million tax benefit for 2021 and 2020, respectively. Valuation allowances against deferred tax assets are comprised of cumulative losses, credits and other timing differences. Our mix of earnings has an unfavorable tax rate impact since a majority of our pretax income is earned in higher tax jurisdictions. Significant deferred tax assets and liabilities as of December 31, 2022 and 2021 are composed of the following temporary differences:
| 2022 |  | 2021
Deferred Tax Assets: |  |  |
Net operating loss carryforwards | $ | 45,823 |  |  | $ | 47,660 |
Operating and finance leases | 20,974 |  |  | 22,492 |
Pension liabilities | 8,178 |  |  | 29,770 |
Share-based compensation | 9,970 |  |  | 6,764 |
U.S. federal tax credits | — |  |  | 4,226 |
U.S. state tax credits | 6,777 |  |  | 7,047 |
Vacation and bonus | 14,681 |  |  | 13,450 |
U.S. capitalized research expenditures | 27,840 |  |  | 19,633 |
Inventory | 4,736 |  |  | 6,969 |
Accrued liabilities and other reserves | 10,346 |  |  | 3,109 |
Other | 11,744 |  |  | 16,194 |
Total gross deferred tax assets | $ | 161,069 |  |  | $ | 177,314 |
Less valuation allowance | (46,239) |  |  | (47,149) |
Net deferred tax assets | $ | 114,830 |  |  | $ | 130,165 |
Deferred Tax Liabilities: |  |  |
Acquisition related intangibles | $ | 59,084 |  |  | $ | 68,174 |
Depreciation and amortization | 29,142 |  |  | 30,997 |
Operating and finance leases | 23,041 |  |  | 24,560 |
Other | 6,563 |  |  | 7,489 |
Total gross deferred tax liabilities | $ | 117,830 |  |  | $ | 131,220 |
Net deferred tax liabilities | $ | (3,000) |  |  | $ | (1,055) |
We evaluate the deferred tax assets and record a valuation allowance when it is believed it is more likely than not that the benefit will not be realized. We have established a valuation allowance for $39.2 million of the $45.8 million of tax effected net operating loss carryforwards. These losses are generally in locations that have not produced cumulative three year operating profit. A valuation allowance of $4.0 million has also been established against the $6.8 million of U.S. state tax credit carryforwards. There is no expiration date on $42.5 million of the tax-effected net operating loss carryforwards and $3.3 million (tax effected) will expire in the years 2023 to 2042. The U.S. state tax credit carryforwards of $6.8 million (tax effected) will expire in the years 2023 to 2037. None of the earnings accumulated outside of the U.S. will be subject to U.S. taxation under the current U.S. federal income tax laws. Aside from the earnings in Germany and the pre-2020 earnings in Italy, Switzerland and Colombia, we maintain our assertion that all other cash and distributable reserves at our non-U.S. affiliates will continue to be indefinitely reinvested. We estimate the amount of additional local income tax and withholding tax that would be payable on distributions to be in the range of $15 million to $20 million if earnings accumulated outside the U.S. are repatriated to the U.S. We have not provided for taxes on certain tax-deferred income related to a foreign operation. The income arose predominately from government grants. Taxes of approximately $1.3 million would become payable in the event the terms of the grant are not fulfilled. Income Tax Uncertainties We provide a liability for the amount of tax benefits realized from uncertain tax positions. A reconciliation of the beginning and ending amount of income tax uncertainties is as follows:
| 2022 |  | 2021 |  | 2020
Balance at January 1 | $ | 7,225 |  |  | $ | 4,504 |  |  | $ | 3,647 |
Increases based on tax positions for the current year | 1,433 |  |  | 262 |  |  | 212 |
Increases based on tax positions of prior years | 966 |  |  | 3,348 |  |  | 790 |
Decreases based on tax positions of prior years | (2,582) |  |  | — |  |  | — |
Settlements | (80) |  |  | (567) |  |  | — |
Lapse of statute of limitations | (43) |  |  | (322) |  |  | (145) |
Balance at December 31 | $ | 6,919 |  |  | $ | 7,225 |  |  | $ | 4,504 |
The amount of income tax uncertainties that, if recognized, would impact the effective tax rate is approximately $6.9 million. We estimate that it is reasonably possible that the liability for uncertain tax positions will decrease by approximately $3.4 million in the next twelve months from the resolution of various uncertain positions as a result of the completion of tax audits, litigation and the expiration of the statute of limitations in various jurisdictions. We recognize interest and penalties accrued related to unrecognized tax benefits as a component of income taxes. As of December 31, 2022, 2021 and 2020, we had approximately $4.9 million, $4.6 million and $3.6 million, respectively, accrued for the payment of interest and penalties, of which approximately $0.3 million, $1.1 million and $1.7 million was recognized in income tax expense for the years ended December 31, 2022, 2021 and 2020, respectively. Aptar or its subsidiaries file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. The major tax jurisdictions we file in, with the years still subject to income tax examinations, are listed below:
Major Tax Jurisdiction | Tax Years Subject to Examination
United States — Federal | 2019-2022
United States — State | 2018-2022
France | 2019-2022
Germany | 2018-2022
Italy | 2016-2022
China | 2012-2022

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