INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

13. INCOME TAXES

2017 Tax Cuts and Jobs Act

In conjunction with the enactment of the 2017 Tax Cuts and Jobs Act (the Tax Act), the Corporation recorded provisional income tax expense of $18.2 million for the year ended December 31, 2017 related to the one-time transition tax on certain foreign earnings. The finalized transition tax of $23.6 million was to be paid over 8 years pursuant to the Tax Act. The transition tax liability, which is expected to be paid in 2024 and 2025, was $7.8 million and $7.4 million as of December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023, the Corporation reassessed its assertion around whether foreign undistributed earnings should continue to no longer be considered permanently reinvested. Consistent with the prior year findings, the Corporation remained no longer permanently reinvested with the exception of one foreign subsidiary. The Corporation has recorded a liability for withholding taxes that would arise upon distribution of the Corporation’s foreign undistributed earnings.

Except as noted above, the Corporation remains permanently reinvested to the extent of any outside basis differences in its foreign subsidiaries in excess of the amount of undistributed earnings, as it is not practicable to determine the provision impact, if any, due to the complexities associated with this calculation.

Earnings before income taxes for the years ended December 31 consist of:

(In thousands)	2023		2022		2021
Domestic	$	300,200	$	239,356	$	266,140
Foreign(1)	162,870		149,839		82,816
	$	463,070	$	389,195	$	348,956

(1) The Corporation recognized a pre-tax loss of $5 million during the first quarter of 2022 pertaining to the sale of its industrial valve business in Germany, as well as pre-tax impairment losses of $19 million in 2021.

The provision for income taxes for the years ended December 31 consists of:

(In thousands)	2023		2022		2021
Current:
Federal	$	58,629	$	65,047	$	56,804
State	13,098		12,717		15,359
Foreign	36,791		34,520		22,034
Total current	108,518		112,284		94,197
Deferred:
Federal	(180)		(11,413)		(7,167)
State	507		(4,442)		(477)
Foreign	(284)		(1,582)		(426)
Total deferred	43		(17,437)		(8,070)
Provision for income taxes	$	108,561	$	94,847	$	86,127

The effective tax rate varies from the U.S. federal statutory tax rate for the years ended December 31, principally:

	2023		2022		2021
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
Add (deduct):
State and local taxes, net of federal benefit	2.3		1.7		3.7
Foreign earnings(1)	1.3		0.7		0.2
Foreign loss on sale	—		0.2		—
Foreign asset impairment (held for sale)	—		—		1.6
Valuation allowance for foreign assets held for sale	—		—		0.2
R&D tax credits	(1.1)		(1.1)		(1.3)
Foreign-derived intangible income	(1.2)		(1.2)		(1.4)
All other, net	1.1		3.1		0.7
Effective tax rate	23.4	%	24.4	%	24.7	%

(1) Foreign earnings primarily include the net impact of differences between local statutory rates and the U.S. Federal statutory rate, the cost of repatriating foreign earnings, and the impact of changes to foreign valuation allowances, excluding items related to foreign assets that were classified as held for sale in 2021.

The components of the Corporation’s deferred tax assets and liabilities as of December 31 are as follows:

(In thousands)	2023		2022
Deferred tax assets:
Capitalized R&D expenses	$	39,463	$	23,785
Operating lease liabilities	32,041		34,977
Inventories, net	24,282		21,992
Incentive compensation	9,314		8,531
Environmental reserves	8,949		8,677
Net operating loss	8,348		9,096
Legal reserves	287		2,864
Other	30,130		40,965
Total deferred tax assets	152,814		150,887
Deferred tax liabilities:
Goodwill amortization	110,543		103,174
Other intangible amortization	53,551		59,966
Pension and other postretirement assets	37,870		29,053
Operating lease right-of-use assets, net	30,327		32,651
Withholding taxes	16,120		13,200
Depreciation	15,339		15,433
Other	8,160		7,256
Total deferred tax liabilities	271,910		260,733
Valuation allowance	4,892		5,664
Net deferred tax liabilities	$	123,988	$	115,510

Deferred tax assets and liabilities are reflected on the Corporation’s Consolidated Balance Sheets as of December 31 as follows:

(In thousands)	2023		2022
Net noncurrent deferred tax assets(1)	$	8,331	$	7,491
Net noncurrent deferred tax liabilities	132,319		123,001
Net deferred tax liabilities	$	123,988	$	115,510

(1)Amount is classified within the "Other Assets" caption in the Corporation's Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022, respectively.

The Corporation has income tax net operating loss carryforwards related to international operations of $20.1 million, of which $18.4 million have an indefinite life and $1.7 million which expire through 2029. The Corporation has federal and state income tax net loss carryforwards of $47.9 million, all of which are net operating losses that expire through 2041. The Corporation has recorded a deferred tax asset of $8.3 million, reflecting the benefit of the loss carryforwards related to international and domestic operations.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. As of December 31, 2023 the Corporation decreased its valuation allowance by $0.8 million to $4.9 million, in order to measure only the portion of deferred tax assets that more likely than not will be realized. As of December 31, 2023, $2.0 million of the total valuation allowance relates to foreign tax credits arising from branch operations that the Corporation believes it will be unable to utilize. The Corporation recorded a tax benefit of $1.4 million in the current year as compared to a provision of $2.7 million in prior year related to the valuation allowance on branch foreign tax credits. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth.

Income tax payments, net of refunds, of $136.4 million, $61.1 million, and $107.1 million were made in 2023, 2022, and 2021, respectively.

The Corporation has recorded a liability in Other liabilities for interest of $4.2 million and penalties of $2.5 million as of December 31, 2023.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(In thousands)	2023		2022		2021
Balance as of January 1,	$	17,371	$	17,018	$	15,585
Additions for tax positions of prior periods	2,387		3,004		2,877
Reductions for tax positions of prior periods	(2,419)		(1,732)		(1,861)
Additions for tax positions related to the current year	1,744		1,068		655
Settlements	(1,195)		(1,987)		(238)
Balance as of December 31,	$	17,888	$	17,371	$	17,018

In many cases, the Corporation’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities.

The following describes the open tax years, by major tax jurisdiction, as of December 31, 2023:

United States (Federal)	2020	-	present
United States (Various states)	2012	-	present
United Kingdom	2022	-	present
Canada	2020	-	present

The Corporation does not expect any significant changes to the estimated amount of liability associated with its uncertain tax positions through the next twelve months. Included in total unrecognized tax benefits as of December 31, 2023, 2022, and 2021 is $15.3 million, $15.1 million, and $14.1 million, respectively, which if recognized, would favorably impact the effective income tax rate.