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INCOME TAX PROVISION
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAX PROVISION
Income before income taxes was comprised of the following for the years ended December 31:
(in thousands)202220212020
U.S.$51,640 $62,361 $7,130 
Foreign32,738 31,442 19,673 
Income before income taxes$84,378 $93,803 $26,803 
The components of the income tax provision were as follows for the years ended December 31:
(in thousands)202220212020
Current tax provision:
Federal$27,789 $(61)$17,643 
State8,507 2,389 4,502 
Foreign11,081 10,945 4,779 
Total current tax provision47,377 13,273 26,924 
Deferred tax provision:
Federal(21,368)15,889 (4,480)
State(5,710)1,958 (1,232)
Foreign(1,451)(89)256 
Total deferred tax provision(28,529)17,758 (5,456)
Income tax provision$18,848 $31,031 $21,468 

The effective tax rate on pretax income reconciles to the U.S. federal statutory tax rate for the years ended December 31 as follows:
202220212020
Income tax at federal statutory rate21.0 %21.0 %21.0 %
Goodwill impairment charges (Note 8)— — 46.8 %
Change in valuation allowances7.2 %0.1 %0.9 %
Tax impact of share-based compensation3.2 %0.9 %8.5 %
State income tax expense, net of federal income tax benefit2.7 %2.4 %2.1 %
Tax on repatriation of foreign earnings2.2 %4.9 %— 
Non-deductible executive compensation2.2 %1.7 %2.2 %
Foreign tax rate differences1.9 %1.7 %4.3 %
Change in unrecognized tax benefits, including interest and penalties0.2 %(0.6 %)(3.3 %)
Non-deductible acquisition costs0.1 %1.5 %— 
Sale of business (Note 6)(15.8 %)— — 
Return to provision adjustments(1.9 %)— (2.6 %)
Research and development tax credit(1.2 %)(0.9 %)(3.7 %)
Payables and receivables for prior year tax returns(0.3 %)0.2 %3.2 %
Non-taxable income from employee life insurance policies(0.3 %)(0.3 %)(1.1 %)
Other1.1 %0.5 %1.8 %
Effective tax rate22.3 %33.1 %80.1 %

In May 2022, we completed the sale of our Australian web hosting business (Note 6), and we recognized a capital loss on the transaction for tax purposes. We recorded a valuation allowance for the portion of this capital loss carryover that we do not currently expect to realize. During the fourth quarter of 2022, we identified and recorded an out-of-period correcting adjustment related to the income tax provision recorded on this sale in the second quarter of 2022. The income tax provision and accrued income taxes were overstated by $5,900 in the second quarter of 2022, and the income tax provision was understated by the same amount in the fourth quarter. There was no impact to the full year 2022 income tax provision, and this adjustment was not material to our results of operations for the periods ended June 30, 2022, September 30, 2022 or December 31, 2022.

During 2022, we repatriated current year foreign earnings of $25,526 held in cash by our Canadian subsidiaries. The associated tax expense of $1,818 was included in the income tax provision for the year ended December 31, 2022. We believe the accumulated and remaining cash of our Canadian subsidiaries is sufficient to meet their working capital needs. The historical unremitted Canadian earnings as of December 31, 2021, as well as the accumulated and future unremitted earnings of our European subsidiaries, will continue to be reinvested indefinitely in the operations of those subsidiaries. Deferred income taxes have not been recognized on these earnings as of December 31, 2022. If we were to repatriate our foreign cash and cash equivalents into the U.S. at one time, the tax effects would generally be limited to foreign withholding taxes on any such
distribution. As of December 31, 2022, the amount of cash and cash equivalents held by our foreign subsidiaries was $33,615, primarily in Canada.

During the fourth quarter of 2021, we repatriated accumulated foreign earnings of $85,285 held in cash by our Canadian subsidiaries. We decided to complete the repatriation due, in part, to changes in Canadian law announced during 2021 and the reorganization of our capital structure in June 2021 in conjunction with the First American acquisition (Note 6). The associated tax expense of $4,555 was included in the income tax provision for the fourth quarter of 2021.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued interest and penalties and the federal benefit of deductible state income tax, was as follows:
(in thousands)202220212020
Balance, beginning of year$2,551 $3,361 $4,169 
Additions for tax positions of current year250 169 237 
Additions for tax positions of prior years270 8 30 
Reductions for tax positions of prior years(45)(673)(414)
Lapse of statutes of limitations(391)(314)(661)
Balance, end of year$2,635 $2,551 $3,361 

If the unrecognized tax benefits as of December 31, 2022 were recognized in the consolidated financial statements, income tax expense would decrease $2,635. Accruals for interest and penalties, excluding the tax benefits of deductible interest, were $731 as of December 31, 2022 and $635 as of December 31, 2021. Our income tax provision included expense for interest and penalties of $97 in 2022 and $84 in 2021 and included a reduction for interest and penalties of $384 in 2020. We believe that it is reasonably possible that a decrease of up to $1,500 in unrecognized tax benefits related to state tax exposures may be necessary within the next 12 months, with the majority related to the lapse of statutes of limitations. We believe it is reasonably possible that an increase of up to $2,000 in unrecognized tax benefits may be necessary within the next 12 months, related to legislative and regulatory changes in certain state and local jurisdictions. Due to the nature of the underlying liabilities and the extended time frame often needed to resolve income tax uncertainties, we cannot provide reliable estimates of the amount or timing of cash payments that may be required to settle these liabilities.

The statute of limitations for federal tax assessments for 2018 and prior years has expired. Our 2019 through 2021 returns and our 2022 return, when filed, are subject to IRS examination. In general, income tax returns for the years 2019 through 2022 remain subject to examination by foreign, state and city tax jurisdictions. In the event that we have determined not to file income tax returns with a particular state or city, all years remain subject to examination by the tax jurisdiction.

The ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any particular issue would require the use of cash and could result in increased income tax expense. Favorable resolution would result in reduced income tax expense.
Tax-effected temporary differences that gave rise to deferred tax assets and liabilities as of December 31 were as follows:
20222021
(in thousands)Deferred tax assetsDeferred tax liabilitiesDeferred tax assetsDeferred tax liabilities
Goodwill$— $30,848 $— $21,190 
Intangible assets— 16,901 — 37,170 
Cloud computing arrangements— 13,969 — 16,646 
Employee benefit plans— 11,009 — 10,093 
Revenue recognition— 7,312 — 5,496 
Prepaid assets— 5,474 — 4,844 
Operating leases16,681 12,387 18,388 14,996 
Net operating loss, tax credit and capital loss carryforwards
16,720 — 8,083 — 
Deductible interest carryforward16,403 — 8,352 — 
Reserves and accruals6,935 — 7,320 — 
Payroll tax deferral under the CARES Act— — 2,175 — 
Property, plant and equipment3,139 — 1,347 — 
Inventories2,018 — 1,661 — 
All other2,946 2,500 3,780 2,619 
Total deferred taxes64,842 100,400 51,106 113,054 
Valuation allowances(7,996)— (10,993)— 
Net deferred taxes$56,846 $100,400 $40,113 $113,054 

The valuation allowances as of December 31, 2022 and December 31, 2021 related primarily to capital loss carryforwards in the U.S and Canada and net operating loss carryforwards in various state jurisdictions that we do not currently expect to fully realize. In addition, as of December 31, 2021, the valuation allowances also related to deferred tax assets of our Australian operations. Changes in our valuation allowances for the years ended December 31 were as follows:
(in thousands)202220212020
Balance, beginning of year$(10,993)$(11,453)$(10,349)
Expense from change in allowances(6,086)(65)(244)
Sale of business (Note 6)8,745 — — 
Foreign currency translation338 525 (860)
Balance, end of year$(7,996)$(10,993)$(11,453)

As of December 31, 2022, we had the following net operating loss, deductible interest, capital loss and tax credit carryforwards:

•state net operating loss carryforwards and tax credit carryforwards of $118,646 that expire at various dates between 2023 and 2050;
•federal deductible interest carryforwards of $61,696 that do not expire;
•federal capital loss carryforwards of $34,112 that expire in 2027; and
•foreign capital loss carryforwards of $4,688 that do not expire.