XML 42 R24.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income Tax Provision
The income tax provision was as follows:
Year Ended December 31,
(Dollars in millions)202120202019
Current:
Federal$266.2 $108.9 $40.0 
State111.6 50.3 24.0 
Foreign1.2 — — 
379.0 159.2 64.0 
Deferred:
Federal38.2 17.6 34.7 
State3.8 1.4 5.2 
Foreign1.1 — — 
43.1 19.0 39.9 
Total$422.1 $178.2 $103.9 
At December 31, 2021 and 2020, we had income taxes payable of $43.0 million and $33.1 million, respectively included as a component of accrued liabilities in our Consolidated Balance Sheets.

The reconciliation between amounts computed using the federal income tax rate of 21% and our income tax provision is shown in the following tabulation:
Year Ended December 31,
(Dollars in millions)202120202019
Federal tax provision at statutory rate$311.7 $136.2 $78.8 
State taxes, net of federal income tax benefit85.4 40.4 23.6 
Non-deductible items4.8 2.8 2.6 
Permanent differences related to stock compensation(2.6)(0.5)0.2 
Net change in valuation allowance25.3 0.5 (0.5)
General business credits(2.3)(1.3)(0.9)
Foreign Rate Differential0.5 — — 
Other(0.7)0.1 0.1 
Income tax provision$422.1 $178.2 $103.9 

Deferred Taxes
Individually significant components of the deferred tax assets and (liabilities) are presented below:
December 31,
(Dollars in millions)20212020
Deferred tax assets:
Deferred revenue and cancellation reserves$95.3 $64.2 
Allowances and accruals, including state tax carryforward amounts72.8 55.6 
Lease liability 107.6 73.4 
Credits and other0.6 3.4 
Valuation allowance(26.4)(1.1)
Total deferred tax assets249.9 195.5 
Deferred tax liabilities:
Inventories(20.1)(44.9)
Goodwill(112.3)(76.5)
Property and equipment, principally due to differences in depreciation(185.9)(139.0)
Right of use asset(103.7)(69.8)
Prepaid expenses and other(18.9)(11.6)
Total deferred tax liabilities(440.9)(341.8)
Total$(191.0)$(146.3)

We consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment.

As of December 31, 2021, we had a $26.4 million valuation allowance recorded associated with our deferred tax assets. Of the total valuation allowance, $24.3 million relates to our investment in Shift Technologies Inc. (Shift) and $2.1 million relates to state net operating losses generated in current and previous years. As a result of the significant reduction in value of our investment in Shift during the fourth quarter of 2021 and no readily available capital gains to offset a capital loss when realized, we determined that it is more likely than not that the Shift deferred tax asset will not be realized. The state NOL valuation allowance increased $1.0 million in the current year as a result of losses incurred, the benefits of which are not expected to be realized.

As of December 31, 2021, we had state net operating loss (NOL) carryforward amounts totaling approximately $3.7 million, tax effected, with expiration dates through 2041. We believe that it is more likely than not that the benefit from certain state NOL carryforward amounts will not be realized. In recognition of this risk, we have
recorded a valuation allowance of $2.1 million on the deferred tax assets relating to these state NOL carryforwards as discussed above.

We have taken the position that we intend to indefinitely reinvest the earnings of our Canadian subsidiaries to ensure there is sufficient working capital to expand operations in Canada. Accordingly, we have not recorded a deferred tax liability related to foreign withholding taxes on approximately $4.6 million of undistributed earnings of these Canadian subsidiaries as of December 31, 2021. An immaterial amount of tax would be payable upon the remittance of these undistributed earnings.

Unrecognized Tax Benefits
We had no unrecognized tax benefits recorded as of December 31, 2019. The following is a reconciliation of our unrecognized tax benefits for December 31, 2021 and 2020:
(Dollars in millions)
Balance, December 31, 2019$— 
Increase related to tax positions taken - current year0.2 
Balance, December 31, 20200.2 
Increase related to tax positions taken - current year0.1 
Balance, December 31, 2021$0.3 

Open tax years at December 31, 2021 included the following:
Federal2018 - 2021
States (28)2017 - 2021
Canada2021