Income Taxes

12 Months Ended

Dec. 31, 2022

Components of Income Tax Expense (Benefit), Continuing Operations [Abstract]

Income Taxes

NOTE 25 – Income Taxes

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2022			2021		2020
Current taxes:
Federal	$	159,383		$	167,258	$	143,859
State		49,956			39,911		42,705
Foreign		929			2,950		(236	)
		210,268			210,119		186,328
Deferred taxes:
Federal		8,752			19,747		(31,019	)
State		4,203			5,640		(5,803	)
Foreign		(262	)		6,717		(1,818	)
		12,693			32,104		(38,640	)
Provision for income taxes	$	222,961		$	242,223	$	147,688

Reconciliation of the statutory federal income tax rate with our company’s effective income tax rate is as follows (in thousands):

	Year Ended December 31,
	2022			2021			2020
Statutory rate	$	185,874		$	224,087		$	136,744
State income taxes, net of federal income tax		42,813			37,169			27,934
Change in valuation allowance		9,802			2,248			2,125
Foreign tax rate difference		(2,846	)		125			(2,032	)
Excess tax benefit from stock-based compensation		(19,418	)		(32,004	)		(21,605	)
Non-deductible business expenses		10,944			9,732			7,957
Other, net		(4,208	)		866			(3,435	)
	$	222,961		$	242,223		$	147,688

Tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities (in thousands):

	December 31,
	2022			2021
Deferred tax assets:
Lease liabilities	$	206,091		$	187,576
Deferred compensation		81,457			79,081
Unrealized loss on investments		62,318			—
Receivable reserves		47,308			38,432
Net operating loss carryforwards		28,997			24,837
Accrued expenses		25,833			46,539
Depreciation		—			1,302
Other		—			4,155
Total deferred tax assets		452,004			381,922
Valuation allowance		(24,779	)		(14,515	)
		427,225			367,407
Deferred tax liabilities:
Lease right-of-use assets		(199,085	)		(186,168	)
Goodwill and other intangibles		(61,225	)		(54,887	)
Prepaid expenses		(4,427	)		(7,228	)
Depreciation		(1,180	)		—
Unrealized gain on investments		—			(7,841	)
Other		(2,101	)		—
		(268,018	)		(256,124	)
Net deferred tax asset	$	159,207		$	111,283

Our net deferred tax asset at December 31, 2022, includes net operating loss carryforwards of $144.5 million that expire between 2023 and 2042. Certain of our net operating loss carryforwards do not expire. A valuation allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will not be realized. The valuation allowance was increased by $10.3 million. We believe the realization of the remaining net deferred tax asset of $159.2 million is more likely than not based on the ability to carry back losses against prior year taxable income for tax years before 2022 and carry forward net operating losses indefinitely after 2022, and expectations of future taxable income, which is supported by a history of cumulative income.

The current tax payable, included in accounts payable and accrued expenses, is $9.1 million and $7.3 million as of December 31, 2022 and 2021, respectively. The current tax receivable, included in other assets, is $28.1 million and $44.2 million as of December 31, 2022 and 2021, respectively.

As of December 31, 2022, we considered all undistributed earnings of non-U.S. subsidiaries to be permanently reinvested. Therefore, we have not provided for any U.S. deferred income taxes. Because the time or manner of repatriation is uncertain, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings, and therefore cannot quantify the tax liability that would be payable in the event all such foreign earnings are repatriated.

Uncertain Tax Positions

As of December 31, 2022 and 2021, we had $5.3 million and $4.9 million, respectively, of gross unrecognized tax benefits, all of which, if recognized, would impact the effective tax rate. We recognize interest and penalties related to uncertain tax positions in provision for income taxes in the consolidated statements of operations. As of December 31, 2022 and 2021, we had accrued interest and penalties of $0.3 million and $0.3 million, respectively, before benefit of federal tax deduction, included in accounts payable and accrued expenses in our consolidated statements of financial condition. The amount of interest and penalties recognized in our consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020, was not significant.

The following table summarizes the activity related to our company’s unrecognized tax benefits from January 1, 2020 to December 31, 2022 (in thousands):

	Year Ended December 31,
	2022			2021			2020
Beginning balance	$	4,924		$	3,962		$	3,387
Increase related to prior year tax positions		195			2,719			977
Decrease related to prior year tax positions		(635	)		(119	)		(11	)
Increase related to current year tax positions		978			745			790
Decrease related to settlements with taxing authorities		—			(2,370	)		(1,181	)
Decrease related to lapsing of statute of limitations		(191	)		(13	)		—
Ending balance	$	5,271		$	4,924		$	3,962

We file income tax returns with the U.S. federal jurisdiction, various states, and certain foreign jurisdictions. We are not subject to U.S. federal examination for taxable years before 2018. We are not subject to certain state and local, or non-U.S. income tax examinations for taxable years before 2015.

There is a reasonable possibility that the unrecognized tax benefits will change within the next 12 months as a result of the expiration of various statutes of limitations or for the resolution of U.S. federal and state examinations, but we do not expect this change to be material to the consolidated financial statements.