Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

(7)Income Taxes

Income before provision for income taxes in 2023, 2022 and 2021 consisted of the following:

	2023		2022		2021
U.S.	$	640,255	$	560,115	$	611,267
Foreign		12,185		12,718		14,438
Income before provision for income taxes	$	652,440	$	572,833	$	625,705

The differences between the U.S. Federal statutory income tax provision (using the statutory rate of 21%) and the Company’s consolidated provision for income taxes for 2023, 2022 and 2021 are summarized as follows:

	2023			2022			2021
Federal income tax provision based on the statutory rate	$	137,012		$	120,295		$	131,398
State and local income taxes, net of related Federal income taxes		19,473			15,978			15,108
Non-resident withholding and foreign income taxes		25,301			23,276			21,833
Foreign tax and other tax credits		(25,786	)		(19,849	)		(23,509	)
Foreign derived intangible income		(17,850	)		(15,068	)		(16,800	)
Excess tax benefits from equity-based compensation		(3,397	)		(2,169	)		(18,911	)
Non-deductible expenses, net		5,040			3,322			4,501
Unrecognized tax provision (benefit), net of related Federal income taxes		16			(3,788	)		4,372
Other		(6,487	)		(1,427	)		(2,754	)
Provision for income taxes	$	133,322		$	120,570		$	115,238

Excess tax benefits from equity-based compensation activity resulted in a decrease in the Company’s provision for income taxes of $3.4 million, $2.2 million and $18.9 million in 2023, 2022 and 2021, respectively, primarily due to the recognition of excess tax benefits for options exercised and the vesting of equity awards.

The components of the 2023, 2022 and 2021 consolidated provision for income taxes were as follows:

	2023			2022			2021
Provision for Federal income taxes
Current provision	$	100,287		$	76,552		$	74,910
Deferred (benefit) provision		(16,467	)		4,125			(2,051	)
Total provision for Federal income taxes		83,820			80,677			72,859
Provision for state and local income taxes
Current provision		27,243			20,489			16,507
Deferred (benefit) provision		(2,991	)		577			(461	)
Total provision for state and local income taxes		24,252			21,066			16,046
Provision for non-resident withholding and foreign income taxes
Current provision		25,301			23,276			21,833
Deferred (benefit) provision		(51	)		(4,449	)		4,500
Total provision for non-resident withholding and foreign income taxes		25,250			18,827			26,333
Provision for income taxes	$	133,322		$	120,570		$	115,238

As of December 31, 2023 and January 1, 2023, the significant components of net deferred income taxes were as follows:

	December 31, 2023			January 1, 2023
Deferred income tax assets
Operating lease liabilities	$	53,720		$	56,750
Accruals and reserves		16,176			11,330
Insurance reserves		12,592			13,039
Non-cash equity-based compensation expense		10,309			8,849
Foreign tax credit		16,798			13,464
Other		13,181			12,150
Deferred income tax assets before valuation allowance		122,776			115,582
Less, valuation allowance		(18,166	)		(15,001	)
Deferred income tax assets, net		104,610			100,581
Deferred income tax liabilities
Operating lease right-of-use assets		50,883			54,057
Capitalized software		14,523			27,443
Depreciation, amortization and asset basis differences		12,155			15,851
Unrealized gain on investments		13,369			9,065
Deferred income tax liabilities		90,930			106,416
Net deferred income taxes	$	13,680		$	(5,835	)

Realization of the Company’s deferred tax assets is dependent upon many factors, including, but not limited to, the Company’s ability to generate sufficient taxable income. Although realization of the Company’s deferred tax assets is not assured, on an ongoing basis, management assesses whether it remains more likely than not the deferred tax assets will be realized.

As of December 31, 2023 and January 1, 2023, the Company had total foreign tax credits of $16.8 million and $13.5 million, respectively, which were fully offset with a corresponding valuation allowance. As of December 31, 2023 and January 1, 2023, the Company also had valuation allowances related to interest deductibility in separately filed states of $1.4 million and $1.5 million, respectively. Management believes the remaining deferred tax assets will be realized. For financial reporting purposes, the Company’s investment in foreign subsidiaries does not exceed its tax basis. Therefore, no deferred income taxes have been provided. In 2023 and 2021, the Company recorded certain unrealized gains on its non-controlling interest in DPC Dash as disclosed in Note 4, and accordingly, has also recorded a deferred tax liability representing the book basis over tax basis related to these unrealized gains.

The Company recognizes the financial statement benefit of a tax position if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authorities widely understood administrative practices and precedents. For tax positions meeting the “more likely than not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense and recognizes penalties in income tax expense.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2023, January 1, 2023 and January 2, 2022 is as follows:

	December 31, 2023			January 1, 2023			January 2, 2022
Unrecognized tax benefits at beginning of period	$	3,902		$	7,690		$	3,318
Additions for tax positions of current year		961			887			2,611
Additions for tax positions of prior years		503			958			2,624
Reductions for changes in prior year tax positions		(551	)		(4,521	)		(379	)
Reductions for lapses of applicable statute of limitations		(897	)		(1,112	)		(484	)
Unrecognized tax benefits at end of period	$	3,918		$	3,902		$	7,690

As of December 31, 2023, the amount of unrecognized tax benefits was $3.9 million of which, if ultimately recognized, $3.9 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. As of December 31, 2023, the Company had $0.4 million of accrued interest and no accrued penalties.

As of January 1, 2023, the amount of unrecognized tax benefits was $3.9 million of which, if ultimately recognized, $3.6 million would be recognized as an income tax benefit and reduce the Company’s effective tax rate. As of January 1, 2023, the Company had $0.3 million of accrued interest and no accrued penalties.

There are currently no Internal Revenue Service audits in progress for the Company. The Company continues to be under examination by certain states. The Company’s Federal statute of limitation has expired for years prior to 2020, but it varies for state and foreign locations. The Company believes appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.