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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The “Income before income tax expense” line item in the consolidated statements of operations consisted of:
(Dollars in thousands) | 2022 |  | 2021 |  | 2020
Domestic | $ | 58,390 |  |  | $ | 34,435 |  |  | $ | (4,371) |
International | 81,990 |  |  | 91,845 |  |  | 72,905 |
Total | $ | 140,380 |  |  | $ | 126,280 |  |  | $ | 68,534 |
The “Income tax expense” line item in the consolidated statements of operations consisted of:
(Dollars in thousands) | Current |  | Deferred |  | Total
2022 |  |  |  |  |
Domestic | $ | 26,666 |  |  | $ | (18,730) |  |  | $ | 7,936 |
International | 17,641 |  |  | (1,826) |  |  | 15,815 |
Total | $ | 44,307 |  |  | $ | (20,556) |  |  | $ | 23,751 |
2021 |  |  |  |  |
Domestic | $ | 5,155 |  |  | $ | (2,938) |  |  | $ | 2,217 |
International | 16,187 |  |  | (257) |  |  | 15,930 |
Total | $ | 21,342 |  |  | $ | (3,195) |  |  | $ | 18,147 |
2020 |  |  |  |  |
Domestic | $ | 5,340 |  |  | $ | (11,012) |  |  | $ | (5,672) |
International | 26,610 |  |  | (2,394) |  |  | 24,216 |
Total | $ | 31,950 |  |  | $ | (13,406) |  |  | $ | 18,544 |
Deferred tax assets and liabilities as of December 31, 2022 and 2021, were comprised of the following:
(Dollars in thousands) | 2022 |  | 2021
Deferred tax assets |  |  |
Accrued employee benefits and compensation | $ | 8,678 |  |  | $ | 10,647 |
Net operating loss carryforwards | 4,433 |  |  | 3,785 |
Tax credit carryforwards | 2,823 |  |  | 13,170 |
Reserves and accruals | 4,716 |  |  | 5,145 |
Operating leases | 4,227 |  |  | 4,191 |
Capitalized research and development | 21,305 |  |  | 16,622 |
Other | 10,205 |  |  | 5,299 |
Total deferred tax assets | 56,387 |  |  | 58,859 |
Less deferred tax asset valuation allowance | (2,843) |  |  | (9,775) |
Total deferred tax assets, net of valuation allowance | 53,544 |  |  | 49,084 |
Deferred tax liabilities |  |  |
Depreciation and amortization | 14,368 |  |  | 32,669 |
Postretirement benefit obligations | 687 |  |  | 2,071 |
Unremitted earnings | 2,551 |  |  | 2,335 |
Operating leases | 4,618 |  |  | 4,422 |
Other | 4,228 |  |  | 4,367 |
Total deferred tax liabilities | 26,452 |  |  | 45,864 |
Net deferred tax asset (liability) | $ | 27,092 |  |  | $ | 3,220 |
As of December 31, 2022, we had state net operating loss carryforwards totaling $7.1 million in various state taxing jurisdictions, which expire between 2023 and 2042, and approximately $3.6 million of state research credit carryforwards, which will expire between 2023 and 2040. We believe that it is more likely than not that the benefit from certain of the state net operating loss and state R&D credits carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $2.8 million relating to these carryforwards. We currently have approximately $4.7 million of foreign tax credits that begin to expire in 2028. We had a valuation allowance of $2.8 million as of December 31, 2022 and $9.8 million as of December 31, 2021, against certain of our deferred tax assets, primarily carryforwards expected to expire unused and deferred tax assets that are capital in nature. No valuation allowance has been provided on our other deferred tax assets, as we believe it is more likely than not that all such assets will be realized in the applicable jurisdictions. Differences between forecasted and actual future operating results or changes in carryforward periods could adversely impact the amount of deferred tax asset considered realizable. Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income taxes. The reasons for this difference were as follows:
(Dollars in thousands) | 2022 |  | 2021 |  | 2020
Tax expense at Federal statutory income tax rate | $ | 29,480 |  |  | $ | 26,519 |  |  | $ | 14,392 |
Impact of foreign operations | 1,531 |  |  | 2,020 |  |  | 1,193 |
Foreign source income, net of tax credits | (6,461) |  |  | (4,944) |  |  | 1,050 |
State tax, net of federal | 6,898 |  |  | 175 |  |  | (313) |
Unrecognized tax benefits | 1,921 |  |  | (8,823) |  |  | 5,800 |
Equity compensation excess tax deductions | (3,025) |  |  | 262 |  |  | (791) |
General business credits | (821) |  |  | (867) |  |  | (931) |
Distribution related foreign taxes | 1,504 |  |  | 2,516 |  |  | 2,332 |
Executive compensation limitation | 2,859 |  |  | 1,570 |  |  | 900 |
Valuation allowance change | (6,932) |  |  | 525 |  |  | (5,375) |
Disproportionate tax effect of pension settlement charges | — |  |  | — |  |  | — |
Other | (3,203) |  |  | (806) |  |  | 287 |
Income tax expense (benefit) | $ | 23,751 |  |  | $ | 18,147 |  |  | $ | 18,544 |
Our effective income tax rate for 2022 was 16.9% compared to 14.4% for 2021. The 2022 rate increase was primarily due to the impact of the decrease in the reversals of unrecognized tax positions in China. We did not make any changes in 2022 to our position on the permanent reinvestment of our historical earnings from foreign operations. With the exception of certain Chinese subsidiaries, we continue to assert that historical foreign earnings are indefinitely reinvested. As of December 31, 2022 and 2021, we had recorded a deferred tax liability of $2.5 million and $2.3 million, respectively, for Chinese withholding tax on undistributed earnings that are not indefinitely reinvested. The other remaining foreign subsidiaries have both the intent and ability to indefinitely reinvest their undistributed earnings and we estimate that, if these undistributed earnings are distributed, they may give rise to an estimated $2.1 million of additional tax liabilities. If circumstances change and it becomes apparent that some, or all of the undistributed earnings as of December 31, 2022 will not be indefinitely reinvested, the provision for the tax consequences, if any, will be recorded in the period when circumstances change. Distributions out of current and future earnings are permissible to fund discretionary activities such as business acquisitions. However, when distributions are made, this could result in a higher effective tax rate. Unrecognized tax benefits, excluding potential interest and penalties, for the years ended December 31, 2022 and 2021, were as follows:
(Dollars in thousands) | 2022 |  | 2021
Beginning balance as of January 1 | $ | 6,583 |  |  | $ | 15,688 |
Gross increases - current period tax positions | 3,402 |  |  | 1,046 |
Gross increases - tax positions in prior periods | 237 |  |  | 1,150 |
Gross decreases - tax positions in prior periods | (178) |  |  | (9,151) |
Foreign currency exchange | (147) |  |  | (10) |
Settlements | (1,028) |  |  | (2,140) |
Ending balance as of December 31 | $ | 8,869 |  |  | $ | 6,583 |
Included in the balance of unrecognized tax benefits as of December 31, 2022 were $7.8 million of tax benefits that, if recognized, would impact the effective tax rate. We recognized interest accrued related to unrecognized tax benefit as income tax expense. Related to the unrecognized tax benefits noted above, as of December 31, 2022 and 2021, we had accrued potential interest and penalties of approximately $1.1 million. We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 2018 through 2022 are subject to examination by the tax authorities. With few exceptions, we are no longer subject to U.S. federal, state, local and foreign examinations by tax authorities for the years before 2018.

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