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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Before Income Taxes | Polaris’ income before income taxes was generated from its United States and foreign operations as follows (in thousands):
| For the Years Ended December 31,
| 2019 |  | 2018 |  | 2017
United States | $ | 344,346 |  |  | $ | 344,728 |  |  | $ | 264,207 |
Foreign | 63,454 |  |  | 84,521 |  |  | 54,584 |
Income before income taxes | $ | 407,800 |  |  | $ | 429,249 |  |  | $ | 318,791 |
Components of Provision for Income Taxes | Components of Polaris’ provision for income taxes are as follows (in thousands):
| For the Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
Federal | $ | 46,441 |  |  | $ | 39,051 |  |  | $ | 41,134 |
State | 18,199 |  |  | 3,759 |  |  | 7,264 |
Foreign | 26,798 |  |  | 27,539 |  |  | 22,267 |
Deferred | (7,522 | ) |  | 23,643 |  |  | 75,634 |
Total provision for income taxes | $ | 83,916 |  |  | $ | 93,992 |  |  | $ | 146,299 |
Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate | Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:
| For the Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 35.0 | %
State income taxes, net of federal benefit | 2.3 |  |  | 1.9 |  |  | 1.4 |
Domestic manufacturing deduction | (2.1 | ) |  | (1.4 | ) |  | (0.5 | )
Research and development tax credit | (4.0 | ) |  | (3.1 | ) |  | (5.6 | )
Stock based compensation | 0.2 |  |  | (1.4 | ) |  | (4.4 | )
Valuation allowance | 0.5 |  |  | 0.2 |  |  | 1.2 |
Tax Reform impact | — |  |  | 0.4 |  |  | 17.4 |
Non-deductible expenses | — |  |  | — |  |  | 2.0 |
Foreign tax rate differential | 1.7 |  |  | 1.3 |  |  | (0.3 | )
Other permanent differences | 1.0 |  |  | 3.0 |  |  | (0.3 | )
Effective income tax rate for continuing operations | 20.6 | % |  | 21.9 | % |  | 45.9 | %
Net Deferred Income Taxes | The net deferred income taxes consist of the following (in thousands):
| As of December 31,
| 2019 |  | 2018
Deferred income taxes: |  |  |
Inventories | $ | 18,550 |  |  | $ | 11,171 |
Accrued expenses | 126,593 |  |  | 105,218 |
Cost in excess of net assets of businesses acquired | (35,203 | ) |  | (22,916 | )
Property and equipment | (88,145 | ) |  | (72,252 | )
Operating lease assets | (26,480 | ) |  | — |
Operating lease liabilities | 27,115 |  |  | — |
Employee compensation and benefits | 61,441 |  |  | 56,286 |
Net operating loss and other loss carryforwards | 20,079 |  |  | 13,847 |
Valuation allowance | (14,620 | ) |  | (10,370 | )
Total net deferred income tax asset | $ | 89,330 |  |  | $ | 80,984 |
Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits | A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
| For the Years Ended December 31,
| 2019 |  | 2018
Balance at January 1, | $ | 25,511 |  |  | $ | 19,096 |
Gross increases for tax positions of prior years | 1,237 |  |  | 6,586 |
Gross increases for tax positions of current year | 3,969 |  |  | 2,522 |
Decreases due to settlements and other prior year tax positions | (5,629 | ) |  | (2,550 | )
Decreases for lapse of statute of limitations | (752 | ) |  | — |
Currency translation effect on foreign balances | 42 |  |  | (143 | )
Balance at December 31, | 24,378 |  |  | 25,511 |
Reserves related to potential interest and penalties at December 31, | 3,714 |  |  | 3,090 |
Unrecognized tax benefits at December 31, | $ | 28,092 |  |  | $ | 28,601 |

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