Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

14.INCOME TAXES

The items comprising income tax expense are as follows:

	Year Ended December 31,
	2023		2022			2021
Provision for current income taxes
Federal	$	94,068	$	81,348		$	17,557
State		31,952		30,051			9,539
Total provision for current income taxes		126,020		111,399			27,096
Provision for deferred income taxes
Federal		5,428		(2,823	)		26,579
State		163		(387	)		6,327
Total provision for deferred income taxes		5,591		(3,210	)		32,906
Total provision for income taxes	$	131,611	$	108,189		$	60,002

The following schedule reconciles the statutory Federal tax rate to the effective income tax rate:

	Year Ended December 31,
	2023			2022			2021
Federal statutory tax rate		21	%		21	%		21	%
Increase (decrease) resulting from:
State income taxes, net of Federal income tax benefit		6	%		6	%		8	%
Nondeductible expenses		3	%		4	%		6	%
Research credit, Federal benefit		(3	%)		(2	%)		(3	%)
Stock-based compensation		0	%		(1	%)		(7	%)
Remeasurement of state deferred tax liabilities		0	%		0	%		(2	%)
Uncertain Tax Position		1	%		0	%		0	%
Effective income tax rate		28	%		28	%		23	%

Our effective income tax rate was 28% for the years ended December 31, 2023 and 2022.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of our deferred tax assets and liabilities were as follows:

	December 31,
	2023			2022
Deferred income tax assets (liabilities):
Mark-to-market investments - OCI	$	301		$	1,260
Stock-based compensation		15,063			4,425
Investment in Paycom Payroll Holdings, LLC		(159,184	)		(146,907	)
Net operating losses		70			189
Noncurrent deferred income tax liabilities, net	$	(143,750	)	$	(141,033	)

At December 31, 2023, we had net operating loss carryforwards for state income tax purposes of approximately $0.1 million, which are available to offset future state taxable income that begin expiring in 2032.

The following table presents a reconciliation of the total unrecognized tax benefits as of the years ended December 31, 2023, 2022 and 2021.

	Year Ended December 31,
	2023		2022		2021
Balance at January 1
Tax positions related to current year:	$	—	$	—	$	—
Additions		3,834		—		—
Reductions		—		—		—
Balance at December 31	$	3,834	$	—	$	—

As of December 31, 2023, 2022 and 2021, there were $3.8 million, $0.0 million and $0.0 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

Where applicable, we classify income tax-related interest and penalties as interest expense and other expense, respectively. During the years ended December 31, 2023, 2022 and 2021, we recorded interest and penalties with regard to uncertain tax positions of $0.8 million, $0.0 million and $0.0 million respectively.

We recognize tax benefits from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. The tax benefits in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized on settlement.

We file income tax returns with the United States federal government and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2020.