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Income Taxes | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The provision (benefit) for income taxes consists of the following:
| Three Months Ended |  | Nine Months Ended
| September 30, 2024 |  | September 30, 2023 |  | September 30, 2024 |  | September 30, 2023
| (in thousands)
Current | $ | 16,038 |  |  | $ | 14,892 |  |  | $ | 38,568 |  |  | $ | 33,364 |
Deferred | (4,153) |  |  | 521 |  |  | (4,112) |  |  | (3,917) |
Income tax provision | $ | 11,885 |  |  | $ | 15,413 |  |  | $ | 34,456 |  |  | $ | 29,447 |
The provision for income taxes differs from the amount computed by applying the Federal statutory income tax rate before the provision for income taxes. The reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows:
| Three Months Ended |  | Nine Months Ended
| September 30, 2024 |  | September 30, 2023 |  | September 30, 2024 |  | September 30, 2023
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of Federal benefit | 4.9 |  |  | 3.4 |  |  | 5.0 |  |  | 4.0 |
Excess tax benefits related to share-based compensation (Note 13) | (7.9) |  |  | (0.8) |  |  | (6.6) |  |  | (3.9) |
Return to provision | (0.3) |  |  | 0.9 |  |  | (0.2) |  |  | 0.3 |
Non-deductible executive compensation | 1.9 |  |  | — |  |  | 1.5 |  |  | — |
Research and development credits | (1.1) |  |  | (0.2) |  |  | (1.2) |  |  | (0.9) |
Change in valuation allowance (Oklahoma Investment Credit) | — |  |  | — |  |  | — |  |  | (2.0) |
Other | (0.1) |  |  | — |  |  | (0.2) |  |  | (0.1) |
Effective tax rate | 18.4 | % |  | 24.3 | % |  | 19.3 | % |  | 18.4 | %
We have historically earned investment tax credits from the state of Oklahoma’s manufacturing property investment program. We use the flow-through method to account for investment tax credits earned on eligible tangible asset expenditures. Under this method, the investment tax credits are recognized as a reduction to our Oklahoma income tax expense in the year they are used. As part of our expansion projects in Oklahoma, we identified a separate, more advantageous Oklahoma credit program (not income tax related) which resulted in us discontinuing our accumulation of credits for Oklahoma’s manufacturing property investment program after the 2022 tax year. Because the Company will not generate additional excess credits after our 2022 tax year, we will be able to use our credit carryforwards against future taxable income and the related valuation allowance was reversed resulting in a one-time benefit of $3.1 million to the income tax provision for the nine months ended September 30, 2023. As of September 30, 2024, we have investment tax credit carryforwards of approximately $0.6 million. These credits have estimated expirations from the year 2039 through 2043. In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 162(m), the tax deduction for covered executives of public companies is limited to $1.0 million per individual. Because of the increase in our stock price and timing of executive stock option exercises this resulted in an increase to the income tax provision of approximately $1.2 million and $2.6 million for the three and nine months ended September 30, 2024, respectively. In accordance with the 2017 Tax Cuts & Jobs Act, under Internal Revenue Code Section 174, research and development expenses incurred after December 31, 2021 are required to be capitalized and amortized over 5 years. The amortization requirements for tax purposes is a mid-year convention, meaning that the tax amortization is 10% in the year of acquisition, 20% in the following 4 years, and 10% in the final year. The Company's estimated annual 2024 effective tax rate, excluding discrete events, is approximately 24.9%. We file income tax returns in the U.S., state and foreign income tax return jurisdictions. We are subject to U.S. income tax examinations for tax years 2021 to present, and to non-U.S. income tax examinations for the tax years 2020 to present. In addition, we are subject to state and local income tax examinations for the tax years 2020 to present. The Company continues to evaluate its need to file returns in various state jurisdictions. Any interest or penalties would be recognized as a component of income tax expense.

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