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INCOME TAX PROVISION
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAX PROVISION
Income before income taxes was comprised of the following for the years ended December 31:
(in thousands)202320222021
U.S.$(7,636)$51,640 $62,361 
Foreign47,435 32,738 31,442 
Income before income taxes$39,799 $84,378 $93,803 

The components of the income tax provision were as follows for the years ended December 31:
(in thousands)202320222021
Current tax provision:
Federal$20,999 $27,789 $(61)
State6,331 8,507 2,389 
Foreign18,118 11,081 10,945 
Total current tax provision45,448 47,377 13,273 
Deferred tax provision:
Federal(20,357)(21,368)15,889 
State(4,389)(5,710)1,958 
Foreign(7,130)(1,451)(89)
Total deferred tax provision(31,876)(28,529)17,758 
Income tax provision$13,572 $18,848 $31,031 

The effective tax rate on pretax income reconciles to the U.S. federal statutory tax rate for the years ended December 31 as follows:
202320222021
Income tax at federal statutory rate21.0 %21.0 %21.0 %
Change in valuation allowances17.5 %7.2 %0.1 %
Tax impact of share-based compensation6.7 %3.2 %0.9 %
Tax on repatriation of foreign earnings6.2 %2.2 %4.9 %
Foreign tax rate differences5.7 %1.9 %1.7 %
Non-deductible executive compensation4.1 %2.2 %1.7 %
Return to provision adjustments2.0 %(1.9 %)— 
State income tax expense, net of federal income tax benefit2.0 %2.7 %2.4 %
Change in state deferred income tax rates1.7 %0.3 %0.1 %
Non-deductible acquisition costs0.2 %0.1 %1.5 %
Business exits (Note 6)(30.2 %)(15.8 %)— 
Research and development tax credit(3.0 %)(1.2 %)(0.9 %)
Other0.2 %0.4 %(0.3 %)
Effective tax rate34.1 %22.3 %33.1 %

In June 2023, we completed the sale of our North American web hosting business, and in May 2022, we completed the sale of our Australian web hosting business. We recognized capital losses on these transactions for tax purposes, and we recorded valuation allowances for the portion of the capital loss carryovers that we do not currently expect to realize. In December 2023, we executed an agreement allowing for the conversion of our Canadian payroll and human resources services customers to another service provider. We recognized a capital gain on this transaction for tax purposes, which we were able to partially offset with capital loss carryforwards. The capital loss carryforwards had been previously offset with a valuation allowance, and as such, we reversed the previously recognized valuation allowance.
We repatriated foreign earnings held in cash by our Canadian subsidiaries of $32,931 during 2023, $25,526 during 2022 and $85,285 during 2021. The associated tax expense included in the income tax provision was $2,168 in 2023, $1,818 in 2022 and $4,555 in 2021. 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 will continue to be reinvested indefinitely in the operations of those subsidiaries. Deferred income taxes have not been recognized on those earnings as of December 31, 2023. 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, 2023, the amount of cash and cash equivalents held by our foreign subsidiaries was $25,270, primarily in Canada.

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)202320222021
Balance, beginning of year$2,635 $2,551 $3,361 
Additions for tax positions of current year249 250 169 
Additions for tax positions of prior years91 270 8 
Reductions for tax positions of prior years— (45)(673)
Settlements(303)— — 
Lapse of statutes of limitations(282)(391)(314)
Balance, end of year$2,390 $2,635 $2,551 

If the unrecognized tax benefits as of December 31, 2023 were recognized in the consolidated financial statements, income tax expense would decrease $2,390. Accruals for interest and penalties, excluding the tax benefits of deductible interest, were $583 as of December 31, 2023 and $731 as of December 31, 2022. Our income tax provision included expense for interest and penalties of $70 in 2023, $97 in 2022 and $84 in 2021. We believe that it is reasonably possible that a decrease of up to $1,300 in unrecognized tax benefits may be necessary within the next 12 months, primarily related to the lapse of statutes of limitations. We also 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 potential 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 2019 and prior years has expired. In general, income tax returns for the years 2020 through 2023 remain subject to examination by federal, 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:
20232022
(in thousands)Deferred tax assetsDeferred tax liabilitiesDeferred tax assetsDeferred tax liabilities
Goodwill$— $40,572 $— $30,848 
Employee benefit plans— 14,482 — 11,009 
Cloud computing arrangements— 10,337 — 13,969 
Revenue recognition— 7,187 — 7,312 
Prepaid assets— 5,385 — 5,474 
Property, plant and equipment— 4,529 3,139 — 
Acquisition costs— 1,604 — 1,691 
Operating leases20,078 15,923 16,681 12,387 
Deductible interest carryforward34,038 — 16,403 — 
Net operating loss, tax credit and capital loss carryforwards
22,639 — 16,720 — 
Reserves and accruals9,522 — 6,935 — 
Gain on payroll and human resources business exit (Note 6)6,100 — — — 
Intangible assets4,510 — — 16,901 
Inventories2,804 — 2,018 — 
Deferred revenue1,406 — 2,951 — 
All other670 719 954 1,768 
Total deferred taxes101,767 100,738 65,801 101,359 
Valuation allowances(14,984)— (7,996)— 
Net deferred taxes$86,783 $100,738 $57,805 $101,359 

The valuation allowances as of December 31, 2023 and December 31, 2022 related primarily to capital loss carryforwards in the U.S and net operating loss carryforwards in various state jurisdictions that we do not currently expect to fully realize. Changes in our valuation allowances for the years ended December 31 were as follows:
(in thousands)202320222021
Balance, beginning of year$(7,996)$(10,993)$(11,453)
Expense from change in allowances(6,979)(6,086)(65)
Sale of business (Note 6)— 8,745 — 
Foreign currency translation(9)338 525 
Balance, end of year$(14,984)$(7,996)$(10,993)

As of December 31, 2023, 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 $125,881 that expire at various dates between 2024 and 2050;
•federal deductible interest carryforwards of $127,238 that do not expire; and
•federal capital loss carryforwards of $57,096 that expire in 2027 and 2028.