Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

The effective tax rate from continuing operations was 22.9%, 25.6% and 24.7% in 2022, 2021 and 2020, respectively. A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows:

	Percent of Income before Income Taxes
	2022			2021			2020
Statutory federal income tax rate		21.0	%		21.0	%		21.0	%
State income taxes - net of federal tax benefit		2.0			3.1			3.3
Foreign tax rate differential		0.6			1.3			0.3
Non-deductible expenses		0.4			0.4			0.7
Tax carryforward expiration		2.5			—			—
Changes in unrecognized tax benefits		(1.0	)		—			(0.8	)
Valuation allowances		(2.3	)		—			—
Other		(0.3	)		(0.2	)		0.2
Effective tax rate for the year		22.9	%		25.6	%		24.7	%

Income before income taxes was attributable to the following sources:

	2022		2021		2020
United States	$	66,646	$	36,203	$	45,070
Foreign		11,564		8,890		3,792
Totals	$	78,210	$	45,093	$	48,862

Income tax expense consisted of the following:

	Year ended December 31,
	2022		2021			2020
Current:
Federal	$	11,583	$	4,901		$	957
State and local		1,739		1,439			1,014
Foreign		2,549		2,389			1,390
Total current provision		15,871		8,729			3,361
Deferred:
Federal		1,675		2,534			8,702
State and local		230		345			356
Foreign		167		(53	)		(326	)
Total deferred provision		2,072		2,826			8,732
Provision for income taxes	$	17,943	$	11,555		$	12,093

During 2018, the Company recorded a provision and related deferred tax liability of $0.6 million related primarily to the earnings of the Company’s subsidiary in Guatemala, which were deemed by management to no longer be permanently reinvested. The earnings and profits for all foreign subsidiaries had been previously included in the calculation of the one-time deemed repatriation transition tax, and thus, should there be a repatriation of earnings from any other foreign subsidiaries in future periods, the Company expects to be subject to only foreign withholding tax. Management does not currently anticipate a repatriation of earnings from any other foreign subsidiaries, except as provided above, as these earnings are deemed to be permanently reinvested.

Significant components of the Company’s deferred taxes as of December 31, 2022 and 2021 are as follows:

	2022			2021
Deferred income tax assets
Compensation accruals	$	2,449		$	2,387
Inventory valuation		1,553			2,008
Allowance for uncollectible accounts		510			489
Non-deductible accruals		4,137			3,538
Operating lease liability		5,932			6,220
Finance lease liability		1,981			2,087
Other deductible non-goodwill intangibles		5,369			5,291
State deferred taxes		32			176
Capital loss carryforwards		127			1,982
Net operating loss carryforwards		21			30
		22,111			24,208
Valuation allowance		(127	)		(1,982	)
		21,984			22,226
Deferred income tax liabilities
Property, plant and equipment		10,508			8,983
Goodwill and indefinite-lived intangibles		9,438			8,755
Right of use asset - operating leases		5,832			6,150
Finance lease assets		1,906			2,051
Other		1,679			1,622
		29,363			27,561
Net deferred income tax liability	$	(7,379	)	$	(5,335	)

During 2017, the Company sold its investments in certain Brazilian subsidiaries. In connection with this divestiture, the Company incurred a capital loss of $9.5 million on its investment in the Myers do Brazil business and recorded a deferred tax asset of $2.0 million for this capital loss carryforward. A full valuation allowance of $2.0 million was recorded against this deferred tax asset, as the recovery of this asset was deemed not more likely than not. As of December 31, 2022, the five year capital loss carryforward period expired and, as a result, both the deferred tax asset of $2.0 million and the offsetting valuation allowance were released. In 2022, the Company impaired its investment in a joint venture, as described in Note 1, incurring a capital loss for which a deferred tax asset of $0.1 million was recorded. As of December 31, 2022 a valuation allowance of $0.1 million was recorded against this capital loss deferred tax asset, as the recovery is not more likely than not.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	2022			2021		2020
Balance at January 1	$	774		$	774	$	1,098
Increases related to previous year tax positions		—			—		59
Reductions due to lapse of applicable statute of limitations		(774	)		—		(383	)
Balance at December 31	$	—		$	774	$	774

The total amount of gross unrecognized tax benefits that would reduce the Company’s effective tax rate was $0.0 million, $0.8 million and $0.8 million at December 31, 2022, 2021 and 2020, respectively.

The Company and its subsidiaries file U.S. Federal, state and local, and non-U.S. income tax returns. As of December 31, 2022, the Company is no longer subject to U.S. Federal examinations by tax authorities for tax years before 2019. In addition, the Company is subject to non-U.S. income tax examinations for tax years of 2017 through 2021.