XML 55 R31.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Reconciliations of the statutory U.S. federal income tax rates to our effective tax rate for continuing operations follow:

 
Years ended December 31,202320222021
Statutory rate21.0 %21.0 %21.0 %
State tax, net of federal benefit3.8 4.1 3.1 
Business credits(1.3)(1.5)(0.8)
Other, net1.8 2.0 1.4 
Effective tax rate25.3 %25.6 %24.7 %

The effective tax rate varies from the statutory U.S. federal rate of 21 percent primarily due to business tax credits and the impact of state taxes, net of federal benefit, for the year ended December 31, 2023; due to business tax credits and the impact of state taxes, net of federal benefit, for the year ended December 31, 2022; and due to the impact of state taxes, net of federal benefit, for the year ended December 31, 2021.
Income tax expense consists of:
 
As of December 31,
(dollars in thousands)		202320222021
Current provision (benefit):
Federal$175,977 $205,954 $259,536 
State44,152 49,427 64,843 
Total current provision (benefit)220,129 255,381 324,379 
Deferred provision (benefit):
Federal(20,687)(75,978)47,240 
State(2,537)(17,692)8,132 
Total deferred provision (benefit)(23,224)(93,670)55,372 
Provision for income tax expense$196,905 $161,711 $379,751 

 
    
The tax effect of temporary differences that give rise to deferred tax assets and liabilities is summarized below.

As of December 31,
(dollars in thousands)		20232022
Deferred tax assets:
Loan reserves$354,412 $362,368 
Net unrealized losses24,176 30,160 
Accrued expenses not currently deductible16,297 12,949 
Unrecorded tax benefits11,568 12,916 
Research and development costs26,519 10,929 
Stock-based compensation plans10,847 9,624 
Acquired intangible assets14,536 781 
Operating loss carryovers26 300 
Other1,426 3,837 
Total deferred tax assets459,807 443,864 
Deferred tax liabilities:
Student loan premiums and discounts, net15,908 14,065 
Fixed assets8,533 9,347 
Federal deferred for state receivable1,171 2,111 
Other614 397 
Total deferred tax liabilities26,226 25,920 
Net deferred tax assets$433,581 $417,944 

Included in operating loss carryovers are state net operating losses of $223 million and $7 million as of December 31, 2023 and 2022, respectively. The Company has recorded a valuation allowance against these net operating losses of $223 million and $7 million, respectively. Also included in operating loss carryovers is a capital loss of $18 million and $16 million as of December 31, 2023 and 2022, respectively. The Company has recorded a full valuation allowance against this capital loss. The valuation allowance is primarily attributable to deferred tax assets for state net operating losses and capital losses that management believes are more likely than not to expire prior to being realized. Included in net unrealized losses is a valuation allowance of $4 million and $4 million, respectively.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible. Management considers, among other things, the scheduled reversals of deferred tax liabilities and the history of positive taxable income in evaluating the realizability of the deferred tax assets. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize our deferred tax assets (other than state net operating loss, net unrealized losses and capital loss carryovers as outlined above).
As of December 31, 2023, the state net operating loss carryforwards will begin to expire in 2029 and the capital losses in 2025.
Accounting for Uncertainty in Income Taxes
The following table summarizes changes in unrecognized tax benefits:
 
As of December 31,
(dollars in thousands)		202320222021
Unrecognized tax benefits at beginning of year$79,366 $75,328 $63,134 
Increases resulting from tax positions taken during a prior period1,204 6,049 1,496 
Decreases resulting from tax positions taken during a prior period(250)(1,327)(1,481)
Increases resulting from tax positions taken during the current period2,711 11,032 20,743 
Decreases related to settlements with taxing authorities(10,089)(4,666)(3,682)
Increases related to settlements with taxing authorities— — 96 
Reductions related to the lapse of statute of limitations(4,819)(7,050)(4,978)
Unrecognized tax benefits at end of year$68,123 $79,366 $75,328 


As of December 31, 2023, the gross unrecognized tax benefits are $68 million. Included in the $68 million are $59 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate. As a part of the Spin-Off, the Company recorded a liability related to uncertain tax positions for which it was indemnified by Navient. See Note 2, “Significant Accounting Policies — Income Taxes” in this Form 10-K for additional details.

Tax-related interest and penalty expense is reported as a component of income tax expense. As of December 31, 2023, 2022, and 2021, the total amount of income tax-related accrued interest and penalties, net of related benefit, recognized in the consolidated balance sheets was $8 million, $8 million, and $10 million, respectively.

For the years ended December 31, 2023, 2022, and 2021, the total amount of income tax-related accrued interest, net of related tax benefit, recognized in the consolidated statements of income was $2 million, $(2) million, and $(1) million, respectively.
The Company or one of its subsidiaries files income tax returns at the U.S. federal level and in most U.S. states. U.S. federal income tax returns filed for years 2014 and prior are no longer subject to examination. Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically three to four prior years). The Company’s federal income tax returns for the years ended December 31, 2015, December 31, 2016, and December 31, 2017 are currently under audit by the Internal Revenue Service. We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits.
It is reasonably possible that the uncertain tax position reserve may decrease by as much as $21 million during the next 12 months due to the expiration of statutes of limitations and audit settlements. The reduction in the uncertain tax position reserve would be reflected as a tax benefit.