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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 9 – Income Taxes

Income before income taxes was derived from the following sources:

 

 

 

2022

 

 

2021

 

 

2020

 

United States

 

$

58,887

 

 

$

32,570

 

 

$

22,725

 

Foreign

 

 

14,817

 

 

 

16,326

 

 

 

17,846

 

 

 

$

73,704

 

 

$

48,896

 

 

$

40,571

 

 

The components of income taxes for the years ended December 31 are as follows:

 

 

 

2022

 

 

2021

 

 

2020

 

Current

 

 

 

 

 

 

 

 

 

Federal

 

$

12,529

 

 

$

649

 

 

$

7,909

 

Foreign

 

 

7,346

 

 

 

5,065

 

 

 

5,093

 

State and local

 

 

2,086

 

 

 

917

 

 

 

1,188

 

 

 

 

21,961

 

 

 

6,631

 

 

 

14,190

 

Deferred

 

 

 

 

 

 

 

 

 

Federal

 

 

577

 

 

 

7,172

 

 

 

(2,290

)

Foreign

 

 

(3,326

)

 

 

(75

)

 

 

(445

)

State and local

 

 

93

 

 

 

(553

)

 

 

(645

)

 

 

 

(2,656

)

 

 

6,544

 

 

 

(3,380

)

Income taxes

 

$

19,305

 

 

$

13,175

 

 

$

10,810

 

 

The differences between the provision for income taxes at the U.S. federal statutory rate and the tax shown in the Statements of Consolidated Income for the years ended December 31 are summarized as follows:

 

 

 

2022

 

2021

 

2020

Federal tax at statutory rate

 

21.0%

 

21.0%

 

21.0%

State and local taxes, net of federal benefit

 

2.2

 

1.5

 

2.3

Valuation allowance

 

2.9

 

(1.5)

 

(0.6)

Non-deductible Goodwill Impairment

 

2.7

 

0.0

 

0.0

Non-U.S. tax rate variances

 

(2.4)

 

6.0

 

3.3

Foreign tax credits

 

(2.0)

 

(2.5)

 

(3.0)

Non-deductible officers' compensation

 

1.4

 

1.6

 

2.9

Officer Life Insurance Proceeds

 

(1.2)

 

0.0

 

0.0

Global intangible low-taxed income

 

0.9

 

1.6

 

3.0

Uncertain tax positions

 

0.7

 

0.0

 

0.0

Other U.S. federal permanent items

 

(0.4)

 

0.1

 

0.4

Tax credits

 

(0.3)

 

(1.7)

 

(0.9)

Other, net

 

0.7

 

0.8

 

(1.8)

Effective income tax rate

 

26.2%

 

26.9%

 

26.6%

 

Income tax expense for the periods ended December 31, 2022, 2021, and 2020 was $19.3 million, $13.2 million, and $10.8 million, respectively. The decrease in the effective tax rate from 2021 to 2022 was primarily due to the mix of income earned in jurisdictions with a lower tax rate than the U.S. and a non-taxable benefit related to the proceeds from a settlement of a Company-owned life insurance policy. This was partially offset by a goodwill impairment charge as discussed in Note 12 as well as an increase in valuation allowances recorded in certain international jurisdictions in 2022.

Deferred Income Tax Assets and Liabilities

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows:

 

 

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

Benefit plan reserves

 

$

6,348

 

 

$

7,048

 

Net operating loss carryforwards

 

 

2,722

 

 

 

2,383

 

Inventory valuation reserves

 

 

2,548

 

 

 

2,504

 

Other accrued expenses

 

 

2,531

 

 

 

2,453

 

Research and development capitalization

 

 

1,533

 

 

 

—

 

Foreign tax credit

 

 

1,153

 

 

 

543

 

Accrued compensation and benefits

 

 

994

 

 

 

1,175

 

Allowance for credit losses

 

 

917

 

 

 

663

 

Unrealized foreign exchange

 

 

215

 

 

 

213

 

Gross deferred tax assets

 

 

18,961

 

 

 

16,982

 

Valuation allowance

 

 

(3,080

)

 

 

(1,932

)

Net deferred tax assets

 

 

15,881

 

 

 

15,050

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

Depreciation and other basis differences

 

 

(10,825

)

 

 

(11,023

)

Intangibles

 

 

(3,263

)

 

 

(2,594

)

Other

 

 

(634

)

 

 

(404

)

Deferred tax liabilities

 

 

(14,722

)

 

 

(14,021

)

Net deferred tax assets

 

$

1,159

 

 

$

1,029

 

 

 

 

 

2022

 

 

2021

 

Change in net deferred tax assets:

 

 

 

 

 

 

Ordinary movement

 

$

2,656

 

 

$

(6,544

)

Deferred tax balances from business acquisitions (see Note 17)

 

 

(1,999

)

 

 

—

 

Items of other comprehensive loss (see Note 6)

 

 

(312

)

 

 

(371

)

Currency translation

 

 

(7

)

 

 

2

 

Other

 

 

(208

)

 

 

—

 

Total change in net deferred tax assets

 

$

130

 

 

$

(6,913

)

 

As of December 31, 2022, various international subsidiaries had gross net operating losses totaling $10.5 million, resulting in deferred tax assets of $2.7 million. Of the international net operating losses, $0.6 million can be carried forward indefinitely, while the remainder, if not utilized, will expire between 2024 and 2033. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance of $1.9 million against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions.

The Company considers earnings in our non-U.S. subsidiaries to be permanently reinvested and therefore did not record any associated deferred income taxes on such earnings. Accordingly, the Company intends to continue to invest approximately $114.7 million of such earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S.

Unrecognized Income Tax Benefits

In 2022, we recognized an increase of $0.5 million to reserves for uncertain tax positions. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits related to uncertain tax positions, excluding interest and penalties, for the year ended December 31:

 

 

 

2022

 

 

2021

 

 

2020

 

Balance at January 1

 

$

—

 

 

$

66

 

 

$

118

 

Additions for tax positions of prior years

 

 

482

 

 

 

—

 

 

 

—

 

Expiration of statutes of limitations

 

 

—

 

 

 

(66

)

 

 

(52

)

Balance at December 31

 

$

482

 

 

$

—

 

 

$

66

 

 

The increase in unrecognized tax benefits was primarily related to a reversal of benefits recognized in previous tax years from foreign tax credits. Additionally, the Company records accrued interest as well as penalties related to unrecognized tax benefits as part of the provision for income taxes. The accrued interest and penalties related to the gross unrecognized tax benefits, excluded from above, was de minimis in all years presented.

Preformed Line Products Company and its subsidiaries file income tax return in the United States and various countries around the world. With few exceptions, the Company is no longer subject to United States federal examinations by tax authorities for years before 2018 and foreign, state, and local examinations by authorities for years before 2016.