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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Domestic and foreign components of income before income taxes were as follows:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Domestic | $ | 64,139 |  |  | $ | 61,028 |  |  | $ | 173,039 |
Foreign | 11,006 |  |  | 9,157 |  |  | 15,284 |
Income before income taxes | $ | 75,145 |  |  | $ | 70,185 |  |  | $ | 188,323 |
The provision for income taxes consisted of:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | (786) |  |  | $ | 1,088 |
State | 348 |  |  | 597 |  |  | 1,408 |
Foreign | 2,497 |  |  | 4,211 |  |  | 4,121 |
Total current income taxes | 2,845 |  |  | 4,022 |  |  | 6,617 |
Deferred: |  |  |  |  |
Federal | 2,658 |  |  | 8,040 |  |  | 14,853 |
State | 1,516 |  |  | (253) |  |  | 10,681 |
Foreign | 656 |  |  | (839) |  |  | (131) |
Total deferred income taxes | 4,830 |  |  | 6,948 |  |  | 25,403 |
Total provision for income taxes | $ | 7,675 |  |  | $ | 10,970 |  |  | $ | 32,020 |
The effective income tax rate was different from the statutory U.S. federal income tax rate due to the following:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Income taxes at 21% statutory tax rate | $ | 15,780 |  |  | $ | 14,739 |  |  | $ | 39,548 |
Net difference resulting from: |  |  |  |  |
Profit of non-controlling interest not subject to U.S. federal tax | (3,754) |  |  | (5,508) |  |  | (15,477) |
Foreign income taxes (net of foreign tax credit) | 2,423 |  |  | 269 |  |  | 364 |
State income taxes (excluding rate change) | 1,348 |  |  | 883 |  |  | 4,887 |
Impact of change in forecasted state income tax rate | 1,347 |  |  | (1,216) |  |  | 5,774 |
Foreign withholding taxes | 730 |  |  | 462 |  |  | 988 |
Change in valuation allowance | (8,977) |  |  | 2,840 |  |  | (3,888) |
Adjustments of prior year taxes | 79 |  |  | (1,663) |  |  | 1,336 |
Stock compensation | (1,096) |  |  | (34) |  |  | (762) |
Other | (205) |  |  | 198 |  |  | (750) |
Total provision for income taxes | $ | 7,675 |  |  | $ | 10,970 |  |  | $ | 32,020 |
Our effective tax rate was 10.2%, 15.6% and 17.0% for the years ended December 31, 2021, 2020 and 2019, respectively. Our effective tax rate is typically lower than the federal statutory rate of 21% due to the fact that Cactus Inc. is only subject to federal and state income tax on its share of income from Cactus LLC. Income allocated to the non-controlling interest is not subject to U.S. federal or state tax. The components of deferred tax assets and liabilities are as follows:
| December 31,
| 2021 |  | 2020
Investment in Cactus LLC | $ | 292,956 |  |  | $ | 224,485 |
Imputed interest | 12,297 |  |  | 10,333 |
Tax credits | 3,713 |  |  | 5,719 |
Net operating loss carryforwards | 11,198 |  |  | 2,333 |
Other | 152 |  |  | 546 |
Deferred tax assets | 320,316 |  |  | 243,416 |
Valuation allowance | (17,242) |  |  | (26,813) |
Deferred tax asset, net | 303,074 |  |  | 216,603 |
Foreign withholding taxes | 854 |  |  | 562 |
Other | 318 |  |  | 224 |
Deferred tax liability, net | $ | 1,172 |  |  | $ | 786 |
As of December 31, 2021, our liability related to the TRA was $281.6 million, representing 85% of the calculated net cash savings in the United States federal, state and local and franchise tax that we anticipate realizing in future years from certain increases in tax basis and certain tax benefits attributed to imputed interest as a result of our acquisition of CW Units. We have determined it is more-likely-than-not that we will be able to utilize all of our tax basis subject to the TRA; therefore, we have recorded a liability related to the TRA for the tax savings we may realize from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of our acquisition (or deemed acquisition for United States federal income tax purposes) of CW Units. If we determine the utilization of this tax basis is not more-likely-than-not in the future, our estimate of amounts to be paid under the TRA would be reduced. In this scenario, the reduction of the liability under the TRA would result in a benefit to our pre-tax consolidated results of operations in conjunction with an increase to the valuation allowance and an offsetting adjustment to tax expense. We record a deferred tax asset for the differences between our tax and book basis in the investment in Cactus LLC and imputed interest on the TRA. Based upon our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize the majority of our U.S. deferred tax assets in the future. We do not expect to realize the portion of our deferred tax asset for our investment in Cactus LLC that may only be realizable through the sale or liquidation of the investment and our ability to generate sufficient capital gains. For the year ended December 31, 2021, as a result of redemptions of CW Units, we released $9.0 million of our valuation allowance and recorded a tax benefit of $9.0 million related to the realizable portion of the deferred tax asset. As of December 31, 2021, we have a valuation allowance of $13.5 million against the $293.0 million deferred tax asset. During the year ended December 31, 2020, as a result of redemptions of CW Units, we released $0.1 million of our valuation allowance and recorded a tax benefit of $0.1 million related to the realizable portion of the deferred tax asset. As of December 31, 2020, we had a valuation allowance of $22.5 million against the $224.5 million deferred tax asset. We also record deferred tax assets for imputed interest, certain tax credits and net operating loss carryforwards. As of December 31, 2021, we have a valuation allowance of $3.7 million against these deferred tax assets, primarily associated with our portion of Cactus LLC’s accrued foreign taxes and state tax credits, due to uncertainty of realization. As of December 31, 2021, we have deferred tax assets on U.S. federal and state net operating loss (“NOL”) carryforwards of approximately $10.4 million and $0.8 million, respectively, which can be used to offset U.S. federal and state taxes payable in future years. The U.S. federal NOL carryforwards have no expiration date whereas the U.S. state NOL carryforwards generally will expire in periods beginning in 2040. As of December 31, 2021 and 2020, we had no uncertain tax positions. None of our federal or state income tax returns are currently under examination by state taxing authorities.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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