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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Components of the provision for income taxes and the income to which it relates for the years ended December 31, 2023, 2022 and 2021 consist of the following (in thousands):

Year Ended December 31,
202320222021
Income before income taxes (1):
Domestic$217,502 $253,560 $110,535 
Foreign75,347 70,073 55,967 
Income before income taxes$292,849 $323,633 $166,502 
Current income taxes:
U.S. Federal$53,217 $23,034 $14,031 
Foreign18,683 15,444 15,242 
U.S. state and local
15,124 3,421 2,045 
Current provision for income taxes87,024 41,899 31,318 
Deferred provision (benefit) for income taxes:
U.S. Federal(6,253)26,732 11,008 
Foreign1,475 (458)(1,542)
U.S. state and local
(8,698)1,965 809 
Total deferred provision for income taxes(13,476)28,239 10,275 
Provision for income taxes$73,548 $70,138 $41,593 

(1)Includes the allocation of certain administrative expenses and intercompany payments, such as royalties and interest, between domestic and foreign subsidiaries.

At December 31, 2023, the cumulative amount of undistributed earnings of foreign subsidiaries was $262.3 million. The Tax Cuts and Jobs Act imposed a mandatory transition tax on accumulated foreign earnings and generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries with the exception of foreign withholding taxes and other foreign local tax. During 2023 and 2022, the Company repatriated $31.0 million and $47.5 million, respectively, from certain foreign subsidiaries, which was not subject to withholding or federal income tax. It is the Company’s intent to indefinitely reinvest the remaining undistributed earnings and future earnings of these subsidiaries outside the U.S. and, therefore, deferred taxes are not currently recorded on cumulative foreign currency translation adjustments.
The principal deferred tax assets and liabilities consist of the following (in thousands):

As of December 31,
20232022
Deferred tax assets:
Property and equipment in foreign jurisdictions$18,761 $14,585 
Finance receivables21,745 19,125 
Accrued fees on forfeited pawn loans8,866 8,168 
Deferred cost of goods sold deduction4,454 2,800 
Accrued compensation, payroll taxes and employee benefits4,509 3,699 
U.S. state and certain foreign net operating losses6,456 6,504 
Other5,100 5,167 
Total deferred tax assets69,891 60,048 
Deferred tax liabilities:
Intangible assets158,888 150,397 
Leased merchandise and property and equipment in domestic jurisdictions27,593 40,950 
Net operating lease asset2,702 2,646 
Other4,511 3,929 
Total deferred tax liabilities193,694 197,922 
Net deferred tax liabilities before valuation allowance(123,803)(137,874)
Valuation allowance(6,456)(6,504)
Net deferred tax liabilities$(130,259)$(144,378)
Reported as:
Deferred tax assets$6,514 $7,381 
Deferred tax liabilities(136,773)(151,759)
Net deferred tax liabilities$(130,259)$(144,378)

The Company has a valuation allowance of $6.5 million and $6.5 million as of December 31, 2023 and 2022, respectively, related to the deferred tax assets associated with its U.S. state and certain foreign net operating losses. The Company has evaluated the nature and timing of its other deferred tax assets and concluded that no additional valuation allowance is necessary.
The following is a reconciliation of income taxes calculated at the U.S. federal statutory rate to the provision for income taxes (dollars in thousands):

Year Ended December 31,
202320222021
U.S. federal statutory rate21 %21 %21 %
Tax at the U.S. federal statutory rate$61,498 $67,963 $35,149 
U.S. state income tax, net of federal tax benefit of $1,349, $1,131 and $599, respectively
5,076 4,255 2,255 
Benefit from gain on revaluation of contingent acquisition consideration— (4,580)— 
Net incremental income tax expense from foreign earnings (1)
4,373 272 2,007 
Non-deductible compensation expense4,358 3,297 1,943 
Other taxes and adjustments, net(1,757)(1,069)239 
Provision for income taxes$73,548 $70,138 $41,593 
Effective tax rate25.1 %21.7 %25.0 %

(1)Includes a $5.7 million, $8.0 million and $6.3 million foreign permanent tax benefit related to an inflation index adjustment allowed under Mexico tax law for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company’s foreign pawn operating subsidiaries are owned by a wholly-owned subsidiary located in the Netherlands. The foreign pawn operating subsidiaries are subject to their respective foreign statutory rates, which differ from the U.S. federal statutory rate. The statutory tax rates in Mexico, Guatemala, Colombia and El Salvador are 30%, 25%, 35% and 30%, respectively. The statutory tax rate in the Netherlands is 0% on eligible dividends received from its foreign subsidiaries.

The Company reviews the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. Interest and penalties related to income tax liabilities that could arise would be classified as interest expense in the Company’s consolidated statements of income.

As of December 31, 2023 and 2022, the Company had no unrecognized tax benefits and, therefore, the Company did not have a liability for accrued interest and penalties and no such interest or penalties were incurred for the years ended December 31, 2023, 2022 and 2021.

The Company files federal income tax returns in the U.S., Mexico, Guatemala, Colombia, El Salvador, Jamaica, Puerto Rico and the Netherlands, as well as multiple state and local income tax returns in the U.S. The Company’s U.S. federal returns are not subject to examination for tax years prior to 2020. The majority of the Company’s U.S. state income tax returns are not subject to examination for the tax years prior to 2020. With respect to federal tax returns in Mexico, Guatemala, Colombia, El Salvador, Jamaica, Puerto Rico and the Netherlands, the tax years prior to 2018 are closed to examination. There are no state income taxes in Mexico, Guatemala, Colombia, El Salvador, Jamaica, Puerto Rico or the Netherlands.