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Income Taxes | 9 Months Ended
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Sep. 30, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | 10. INCOME TAXES The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. The following is a summary of our provision for income taxes and effective tax rate:
|  | For the Quarter Ended September 30, |  |  | For the Year to Date Ended September 30, |
(Dollars in Thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Pretax income |  | $ | 31,292 |  |  | $ | 37,326 |  |  | $ | 109,841 |  |  | $ | 114,292 |
Provision for income taxes |  | $ | 9,225 |  |  | $ | 9,557 |  |  | $ | 29,929 |  |  | $ | 29,121 |
Effective rate |  |  | 29.5 | % |  |  | 25.6 | % |  |  | 27.2 | % |  |  | 25.5 | %
As of December 31, 2021 and through June 30, 2022, a valuation allowance of $32.2 million was maintained with respect to our foreign tax credits not supported by an Overall Domestic Loss (“ODL”) account balance, state net operating losses, and capital loss carryforward based on a consideration at the end of each period of both positive and negative evidence related to the realization of the deferred tax assets. During the quarter ended September 30, 2022, the Company re-evaluated the character of the loss incurred on the elimination of a wholly-owned subsidiary during the prior year. Based on additional analysis, the Company has re-categorized this transaction as an ordinary loss attributable to the stock of a worthless subsidiary in its 2021 tax returns. Additionally, the Company has determined that a full valuation allowance is needed with respect to select combined state net operating losses which are anticipated to go unused based on current expectations. As a result of our assessment, the $3.1 million deferred tax asset and offsetting valuation allowance with respect to the capital loss carryforward has been eliminated and the valuation allowance maintained against our state net operating losses, after considering expired loss carryforwards, has been increased by $1.0 million. The net effect of these items reduced the overall valuation allowance from $32.2 million to $30.1 million. We have determined that it is necessary to continue to maintain a $30.1 million valuation allowance against our non-ODL supported foreign tax credits and state net operating losses as of September 30, 2022 based on a consideration of both positive and negative evidence related to the realization of the deferred tax assets. The effective tax rate for the quarter and year to date ended September 30, 2022 reflects a $1.4 million valuation allowance increase related to the select combined state net operating losses discussed above, which increased the effective tax rate for the quarter and year to date by 4.6% and 1.3% respectively. The effective tax rate for the quarter and year to date ended September 30, 2022 was impacted by federal and state tax credits claimed for the 2021 tax return, which decreased the effective tax rate for the quarter and year to date by 0.3% and 0.1%, respectively. Additionally, the tax effect of stock-based compensation and the release of previously recorded tax reserves for the year to date ended September 30, 2022 tax rate reflects a 0.2% net benefit. The effective tax rate for the quarter and year to date ended September 30, 2021 was impacted by federal and state tax credits claimed for the 2020 tax return, which decreased the effective tax rate for the quarter and year to date by 0.6% and 0.2%, respectively. The tax effect of stock-based compensation and the release of previously recorded tax reserves for the 2021 year to date tax rate reflects a 0.5% net benefit. We estimate that it is reasonably possible that the gross liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $6.1 million in the next twelve months as a result of the completion of efforts related to supporting the worthless subsidiary stock deduction discussed above and various tax audits currently in process as well as the expiration of the statute of limitations in several jurisdictions. The income tax rate for the quarter and year to date ended September 30, 2022 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of September 30, 2022, we had accrued $2.2 million as an estimate for reasonably possible interest and accrued penalties. Our tax returns are routinely examined by federal, state and local tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service has completed its examination of our U.S. income tax returns through our tax year ended December 31, 2014.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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