Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 17—Income Taxes

The sources of income before income taxes were as follows (in millions):

	Year Ended December 31,
	2023		2022		2021
U.S.	$	751.6	$	790.5	$	831.0
Foreign		106.1		85.6		206.0
Income before income taxes	$	857.7	$	876.1	$	1,037.0

The income tax provision consists of the following (in millions):

	Year Ended December 31,
	2023			2022			2021
Current:
Federal	$	194.4		$	185.6		$	190.9
Foreign		63.7			45.5			60.8
State		73.9			73.0			72.7
Total		332.0			304.1			324.4
Deferred:
Federal		(53.9	)		(51.9	)		(64.6	)
Foreign		(20.8	)		(14.9	)		4.0
State		(8.2	)		(10.2	)		(27.4	)
Total		(82.9	)		(77.0	)		(88.0	)
Total	$	249.1		$	227.1		$	236.4

The reconciliation between the expected tax expense and the actual tax provision is computed by applying the U.S. federal corporate income tax rate of 21% to income before income taxes as follows (in millions):

	Year Ended December 31,
	2023			2022			2021
Computed “expected” tax expense	$	180.1		$	184.0		$	217.8
Increase (decrease) in income tax expense resulting from:
State income taxes (net of federal income tax benefit)		51.9			49.5			35.8
Foreign operations		34.6			8.7			(10.8	)
Effects of stock based compensation		(5.5	)		(9.3	)		(24.4	)
Effect of valuation allowance		(17.2	)		8.5			4.1
Uncertain tax positions		19.2			(7.9	)		8.9
Tax credits		(13.3	)		(2.0	)		(7.4	)
Change in rate		-			0.2			13.5
Other		(0.7	)		(4.6	)		(1.1	)
Provision for income taxes	$	249.1		$	227.1		$	236.4

The components of deferred income taxes at December 31, 2023 and 2022 are as follows (in millions):

	2023					2022
	Deferred			Deferred		Deferred			Deferred
	Tax			Tax		Tax			Tax
	Assets			Liabilities		Assets			Liabilities
Net operating loss carryforwards	$	87.8		$	—	$	113.4		$	—
Deferred compensation		85.8			—		74.0			—
Tax credit carryforwards		31.1			—		29.7			—
Accrued expenses		6.4			—		20.7			—
Leases		65.2			58.2		74.7			66.4
Other		76.1			13.7		81.3			15.4
Depreciable and amortizable property		—			837.8		—			943.7
Investments		—			171.1		—			155.9
Total		352.4			1,080.8		393.8			1,181.4
Valuation allowance		(51.4	)		—		(67.0	)		—
Total	$	301.0		$	1,080.8	$	326.8		$	1,181.4

At December 31, 2023 and 2022, we had accrued a deferred income tax liability for foreign withholding taxes of $11.3 million and $12.7 million, respectively, on the unremitted earnings of our major Canadian subsidiary and certain unconsolidated foreign affiliates we do not control and whose earnings cannot be considered permanently reinvested. We have not accrued any deferred income taxes for withholding, foreign local or U.S. state income taxes on the unremitted earnings of other foreign subsidiaries as those earnings are permanently reinvested.

At December 31, 2023, we have domestic federal net operating loss carryforwards of $77.6 million, which will begin to expire in 2026 and state net operating loss carryforwards of $143.8 million, which will begin to expire in 2024. At December 31, 2023, we have foreign net operating loss carryforwards of $269.6 million, of which $241.7 million can be carried forward indefinitely. The remaining $27.9 million will begin to expire in 2024.

At December 31, 2023, we have tax credit carryforwards of $31.1 million relating to domestic and foreign jurisdictions, of which $16.9 million relate to domestic tax credits that are expected to be utilized before they begin to expire in 2024, $12.1 million relate to domestic tax credits that are not expected to be utilized before they begin to expire in 2024, $1.4 million relate to foreign jurisdictions that are expected to be utilized before they begin to expire in 2027 and $0.7 million relate to foreign jurisdictions that are not expected to be utilized before they begin to expire in 2027. The domestic credits consist primarily of federal and state research and development credits and foreign tax credits, while the foreign credits consist primarily of minimum alternative tax credit carryforwards related to our India operations.

A valuation allowance is recorded against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We have recorded valuation allowances of $51.4 million and $67.0 million at December 31, 2023 and 2022, respectively, related primarily to certain foreign and state net operating loss carryforwards, tax credit carryforwards and disallowed interest expense carryforwards. Of the $51.4 million valuation allowance recorded at December 31, 2023, $26.6 million relates to foreign attribute carryforwards that do not expire. The change in the valuation allowance from 2022 to 2023 is primarily due to the write-off of a valuation allowance on fully reserved interest carryforwards.

The following table summarizes the activity related to our unrecognized tax benefits for the years ended December 31, 2023 and 2022 (in millions):

Balance at December 31, 2021	$	132.9
Increases related to current year tax positions		10.8
Decreases related to prior tax positions		(12.0	)
Lapse in statute of limitation		(4.8	)
Foreign exchange translation adjustment		(0.8	)
Balance at December 31, 2022	$	126.1
Increases related to current year tax positions		14.6
Increases related to prior tax positions		7.3
Lapse in statute of limitation		(6.0	)
Balance at December 31, 2023	$	142.0

We accrued $3.0 million and recorded a net benefit of $3.7 million for potential penalties and interest on the unrecognized tax benefits during 2023 and 2022, respectively, and have recorded a total liability for potential penalties and interest, including penalties and interest related to unrecognized tax benefits, of $32.1 million and $28.4 million at December 31, 2023 and 2022, respectively. Our unrecognized tax benefits increased from 2022 to 2023 due to increases in current and prior year tax positions, offset partially by a decrease due to a lapse in the statute of limitations for certain domestic and foreign tax filings. Our unrecognized tax benefits decreased from 2021 to 2022 due to a lapse in the statute of limitations for certain domestic and foreign tax filings and decreases in prior year tax positions, offset partially by an increase in current year tax positions. Our unrecognized tax benefits as of December 31, 2023 relate to domestic and foreign taxing jurisdictions and are recorded in other long-term liabilities on our Consolidated Balance Sheet at December 31, 2023.

We are subject to examination by tax authorities throughout the world, including such major jurisdictions as the U.S., United Kingdom, India, California, Massachusetts, Missouri, New Jersey and New York. In these major jurisdictions, we are no longer subject to examination by tax authorities prior to tax years ending 2017, 2022, 2013, 2007, 2019, 2020, 2019 and 2015, respectively. Our U.S. federal income tax returns are currently under audit for the tax periods ended December 31, 2017 through December 31, 2019. Our India income tax returns are currently under audit or in appeals for all tax periods ending March 31, 2013 through March 31, 2018 and March 31, 2020 through March 31, 2023. Our California income tax returns are currently under audit or in appeals for the tax periods ended December 31, 2007 through 2018. Our Massachusetts income tax returns are currently under audit for the tax periods ended December 31, 2019 through 2020. Our New York income tax returns are currently under audit for the tax periods ended December 31, 2015 through 2018.