Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

For the years ended December 31, 2021, 2020, and 2019, our income tax provision was calculated based on income before income taxes as follows (in thousands):

	2021		2020		2019
United States	$	497,421	$	228,181	$	430,253
Foreign	31,882		24,145		20,636
	$	529,303	$	252,326	$	450,889

Foreign income for each of the years ended December 31, 2021, 2020, and 2019 was predominately earned in the United Kingdom.

The income tax provision for the years ended December 31, 2021, 2020, and 2019 consisted of the following (in thousands):

	2021		2020		2019
Current provision:
Federal	$	95,782	$	115,633	$	89,264
State and local	35,883		36,182		31,099
Foreign	4,420		3,922		3,685
	136,085		155,737		124,048
Deferred provision (benefit)	9,517		(36,354)		1,701
	$	145,602	$	119,383	$	125,749

For the year ended December 31, 2021, our income tax provision was $145.6 million compared to $119.4 million for the year ended December 31, 2020 and $125.7 million for the year ended December 31, 2019. The increase in the income tax provision for 2021, when compared to 2020, was primarily driven by increased income before income taxes and the effect of certain increases in the deferred state tax provision. The decrease in the income tax provision for 2020, when compared to 2019, was primarily driven by reduced state income taxes, inclusive of a deferred state benefit, resulting from a change in the mix of earnings.

The income tax rates on income before income taxes for the years ended December 31, 2021, 2020, and 2019, were 27.5%, 47.3%, and 27.9%, respectively. The decrease in the 2021 income tax rate, when compared to 2020, and the increase in the 2020 income tax rate, when compared to 2019, was predominantly due to the tax effect, in 2020, of the impairment charges recorded during such year, the majority of which were non-deductible for tax purposes. Refer to Note 8 - Goodwill, Identifiable Intangible Assets, and Other Long-Lived Assets of the notes to consolidated financial statements for further discussion regarding such impairment charges.

NOTE 11 - INCOME TAXES (Continued)

Items accounting for the differences between income taxes computed at the federal statutory rate and the income tax provision for the years ended December 31, 2021, 2020, and 2019 were as follows (in thousands):

	2021		2020		2019
Federal income taxes at the statutory rate	$	111,118	$	52,989	$	94,687
State and local income taxes, net of federal tax benefits	31,257		19,290		24,904
Permanent differences	5,316		5,860		7,149
Non-deductible impairment charges	—		40,165		—
Foreign income taxes (including UK statutory rate changes)	(2,241)		(140)		(170)
Other	152		1,219		(821)
	$	145,602	$	119,383	$	125,749

The minimum tax on global intangible low-taxed income for certain earnings of our foreign subsidiaries was approximately $0.1 million for each of the years ended December 31, 2021, 2020, and 2019. The Company recognizes such tax as an expense in the period incurred.

As of December 31, 2021, we had undistributed foreign earnings from certain foreign subsidiaries of approximately $117.1 million. Based on our evaluation, and given that a significant portion of such earnings were subject to tax in prior periods, or are indefinitely reinvested, we have concluded that any taxes associated with the repatriation of such foreign earnings would be immaterial. As of December 31, 2021, the amount of cash held by these foreign subsidiaries was approximately $113.5 million which, if repatriated, should not result in any material federal or state income taxes.

We file a consolidated federal income tax return including all of our U.S. subsidiaries with the Internal Revenue Service. We additionally file income tax returns with various state, local, and foreign tax agencies. Our income tax returns are subject to audit by various taxing authorities and are currently under examination for the years 2017 through 2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides for various tax relief and tax incentive measures, which did not have a material impact on our results of operations. Certain provisions of the CARES Act, however, did favorably impact our liquidity throughout 2020 as they allowed for the deferral of the employer’s portion of current year Social Security tax payments. Our first installment of these deferred Social Security taxes, totaling approximately $51 million, was repaid in the fourth quarter of 2021, and our second installment of approximately $51 million is expected to be paid in the fourth quarter of 2022.

On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law. This act provides for tax relief, as well as an omnibus appropriations package that extends various expiring tax provisions and allows for a 100% tax deduction for the cost of business meals in 2021 and 2022. The Consolidated Appropriations Act did not have a material impact on our income tax provision for the year ended December 31, 2021 and is not expected to have a material impact on our income tax provision for the year ending December 31, 2022.

On March 11, 2021, the American Rescue Plan Act was signed into law. Such act includes certain tax provisions that could have an impact on the Company in future periods, including expanded limits on compensation deductions under Section 162(m) of the Internal Revenue Code for tax years beginning after December 31, 2026. We are currently evaluating the impact that this act may have on our financial position and/or results of operations; however, we anticipate that the expanded provisions of Section 162(m) will result in an increase in our income tax rate for years beginning after December 31, 2026.

NOTE 11 - INCOME TAXES (Continued)

Deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and income tax bases of assets and liabilities. The deferred income tax assets and deferred income tax liabilities recorded as of December 31, 2021 and 2020 were as follows (in thousands):

	December 31, 2021		December 31, 2020
Deferred income tax assets:
Excess of amounts expensed for financial statement purposes over amounts deducted for income tax purposes:
Insurance liabilities	$	50,316	$	47,602
Pension liability	—		6,789
Operating lease liabilities	76,451		68,652
Deferred compensation	40,080		36,790
Accrued federal payroll taxes (1)	14,235		27,428
Other (including liabilities and reserves)	31,252		29,816
Total deferred income tax assets	212,334		217,077
Valuation allowance for deferred tax assets	(2,465)		(3,856)
Net deferred income tax assets	209,869		213,221
Deferred income tax liabilities:
Costs capitalized for financial statement purposes and deducted for income tax purposes:
Goodwill and identifiable intangible assets	(154,382)		(146,821)
Operating lease right-of-use assets	(71,759)		(64,434)
Depreciation of property, plant and equipment	(25,341)		(23,958)
Pension asset	(1,847)		—
Other	(7,491)		(7,444)
Total deferred income tax liabilities	(260,820)		(242,657)
Net deferred income tax liabilities	$	(50,951)	$	(29,436)

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(1)Represents employer Social Security tax payments deferred under the CARES Act.

At December 31, 2021, our net deferred income tax liabilities of $51.0 million were included in “Other long-term obligations” in the accompanying Consolidated Balance Sheet. At December 31, 2020, the components of our net deferred income tax liabilities in the accompanying Consolidated Balance Sheet were included in “Other assets” in the amount of $7.4 million and “Other long-term obligations” in the amount of $36.8 million.

Valuation allowances are established when necessary to reduce deferred income tax assets when it is more likely than not that a tax benefit will not be realized. As of December 31, 2021 and 2020, the total valuation allowance on deferred income tax assets, related to state and local net operating losses and foreign income tax credit carryovers, was approximately $2.5 million and $3.9 million, respectively. The reduction in our valuation allowances at December 31, 2021 was a result of our assessment of recent financial performance and updated projections of future earnings for certain of our subsidiaries, which indicated that we would likely be able to utilize all, or a portion of, certain net operating loss carryforwards, for which we had previously established valuation allowances.

Realization of our deferred income tax assets is dependent on our generating sufficient taxable income in the jurisdictions in which such deferred tax assets will reverse. Although realization is not assured, based on current projections of future taxable income, we believe it is more likely than not that the deferred income tax assets, net of the valuation allowance discussed above, will be realized. However, revisions to our forecasts or declining macroeconomic conditions could result in changes to our assessment of the realization of these deferred income tax assets.