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INCOME TAX PROVISION
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAX PROVISION
Income before income taxes was comprised of the following for the years ended December 31:
(in thousands)202420232022
U.S.$11,072 $(7,636)$51,640 
Foreign65,425 47,435 32,738 
Income before income taxes$76,497 $39,799 $84,378 

The components of the income tax provision were as follows for the years ended December 31:
(in thousands)202420232022
Current tax provision:
Federal$24,922 $20,999 $27,789 
State5,189 6,331 8,507 
Foreign13,831 18,118 11,081 
Total current tax provision43,942 45,448 47,377 
Deferred tax provision:
Federal(21,467)(20,357)(21,368)
State(4,511)(4,389)(5,710)
Foreign5,588 (7,130)(1,451)
Total deferred tax provision(20,390)(31,876)(28,529)
Income tax provision$23,552 $13,572 $18,848 

The effective tax rate on pretax income reconciles to the U.S. federal statutory tax rate for the years ended December 31 as follows:
202420232022
Income tax at federal statutory rate21.0 %21.0 %21.0 %
Foreign tax rate differences4.2 %5.7 %1.9 %
Tax on repatriation of foreign earnings4.0 %6.2 %2.2 %
Non-deductible executive compensation3.0 %4.1 %2.2 %
Change in valuation allowances1.6 %17.5 %7.2 %
Goodwill impairment charges1.0 %— — 
State income tax expense, net of federal income tax benefit0.7 %2.0 %2.7 %
Tax impact of share-based compensation0.6 %6.7 %3.2 %
Return to provision adjustments(5.3 %)2.0 %(1.9 %)
Research and development tax credit(1.8 %)(3.0 %)(1.2 %)
Change in state deferred income tax rates(0.2 %)1.7 %0.3 %
Business exits (Note 6)— (30.2 %)(15.8 %)
Other2.0 %0.4 %0.5 %
Effective tax rate30.8 %34.1 %22.3 %

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 recorded valuation allowances for the portion of the capital loss carryovers that we did not expect to realize. In December 2023, we executed an agreement to transition 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. These capital loss carryforwards had previously been offset with a valuation allowance, and as a result, we reversed the previously recognized valuation allowance.
We repatriated foreign earnings held in cash by our Canadian subsidiaries of $52,707 during 2024, $32,931 during 2023, and $25,526 during 2022. The associated tax expense included in the income tax provision was $3,038 in 2024, $2,168 in 2023, and $1,818 in 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 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, 2024. 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, 2024, the amount of cash and cash equivalents held by our foreign subsidiaries was $20,058, 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)202420232022
Balance, beginning of year$2,390 $2,635 $2,551 
Additions for tax positions of current year413 249 250 
Additions for tax positions of prior years641 91 270 
Reductions for tax positions of prior years(30)— (45)
Settlements— (303)— 
Lapse of statutes of limitations(241)(282)(391)
Balance, end of year$3,173 $2,390 $2,635 

If the unrecognized tax benefits as of December 31, 2024 were recognized in the consolidated financial statements, income tax expense would decrease by $3,173. Accruals for interest and penalties, excluding the tax benefits of deductible interest, were $686 as of December 31, 2024 and $583 as of December 31, 2023. Our income tax provision included expense for interest and penalties of $103 in 2024, $70 in 2023, and $97 in 2022.

We believe that it is reasonably possible that a decrease of up to $1,900 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 $1,800 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 2020 and prior years has expired. In general, income tax returns for the years 2021 through 2024 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:
20242023
(in thousands)Deferred tax assetsDeferred tax liabilitiesDeferred tax assetsDeferred tax liabilities
Goodwill$— $46,947 $— $40,572 
Employee benefit plans— 20,533 — 14,482 
Prepaid assets— 6,738 — 5,385 
Cloud computing arrangements— 6,480 — 10,337 
Revenue recognition— 6,356 — 7,187 
Property, plant and equipment— 5,067 — 4,529 
Acquisition costs— 1,602 — 1,604 
Operating leases16,844 13,203 20,078 15,923 
Deductible interest carryforward50,989 — 34,038 — 
Net operating loss, tax credit, and capital loss carryforwards
24,255 — 22,639 — 
Intangible assets22,585 — 4,510 — 
Reserves and accruals7,272 — 9,522 — 
Inventories3,726 — 2,804 — 
Deferred revenue1,503 — 1,406 — 
Gain on exit from payroll and human resources services business (Note 6)— — 6,100 — 
All other1,385 588 670 719 
Total deferred taxes128,559 107,514 101,767 100,738 
Valuation allowances(16,180)— (14,984)— 
Net deferred taxes$112,379 $107,514 $86,783 $100,738 

The valuation allowances as of December 31, 2024 and December 31, 2023 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)202420232022
Balance, beginning of year$(14,984)$(7,996)$(10,993)
Expense from change in allowances(1,196)(6,979)(6,086)
Sale of business (Note 6)— — 8,745 
Foreign currency translation— (9)338 
Balance, end of year$(16,180)$(14,984)$(7,996)

As of December 31, 2024, 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 $141,419, which expire at various dates between 2025 and 2050;
•federal deductible interest carryforwards of $197,581, which do not expire; and
•federal capital loss carryforwards of $61,426, which expire in 2027 and 2028.