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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 12 — Income Taxes

Below is a summary of the components of the Company’s income before income taxes for the years ended December 31 (in thousands).
 202320222021
U.S.$574,458 $560,193 $485,472 
Non-U.S.572,671 467,002 484,398 
Income before income taxes$1,147,129 $1,027,195 $969,870 
 
The components of the expense (benefit) for income taxes on the above income are summarized in the table below (in thousands).
 202320222021
Current tax expense:   
U.S. federal$171,917 $122,191 $117,024 
State and local51,441 48,482 36,266 
Foreign107,421 91,596 64,835 
Total current330,779 262,269 218,125 
Deferred tax (benefit) expense:   
U.S. federal(35,457)(21,337)(4,640)
State and local(13,475)(10,108)3,156 
Foreign(12,845)(4,232)(33,389)
Total deferred(61,777)(35,677)(34,873)
Total current and deferred269,002 226,592 183,252 
Expense relating to interest rate swaps used to increase equity
(4,976)(5,569)(7,281)
Benefit from stock transactions with employees used to increase equity105 66 78 
Benefit (expense) relating to defined-benefit pension adjustments used to increase equity
532 (1,693)261 
Total tax expense$264,663 $219,396 $176,310 
 
The components of long-term deferred tax assets (liabilities) are summarized in the table below (in thousands).
 December 31,
 20232022
Accrued liabilities$85,328 $72,610 
Operating leases59,160 63,289 
Intangible assets92,612 35,803 
Property, equipment and leasehold improvements9,631 — 
Loss and credit carryforwards31,454 37,978 
Assets relating to equity compensation29,128 19,299 
Other assets13,126 16,638 
Gross deferred tax assets320,439 245,617 
Valuation allowance(177,132)(152,808)
Net deferred tax assets143,307 92,809 
Property, equipment and leasehold improvements— (1,856)
Prepaid expenses(69,556)(69,230)
Other liabilities(15,587)(22,936)
    Gross deferred tax liabilities(85,143)(94,022)
Net deferred tax assets (liabilities)
$58,164 $(1,213)

Net deferred tax assets and net deferred tax liabilities were $144.7 million and $86.6 million as of December 31, 2023, respectively, and $138.3 million and $139.5 million as of December 31, 2022, respectively. These amounts are reported in Other assets and Other liabilities in the Consolidated Balance Sheets. Management has concluded it is more likely than not that the reversal of deferred tax liabilities and results of future operations will generate sufficient taxable income to realize the deferred tax assets, net of the valuation allowance at December 31, 2023.

In 2023, the Company increased deferred tax assets by approximately $38.4 million for tax basis in intangible assets due to the intercompany transfer of certain intellectual property. The Company recorded an offsetting increase in the valuation allowance. No net tax benefit was recognized on the transfer, consistent with the Company’s continued expectation that no benefit will be recovered from the tax basis.
 
The valuation allowances of $177.1 million and $152.8 million as of December 31, 2023 and 2022, respectively, primarily related to tax basis in certain intangible assets and loss and credit carryovers that are not likely to be realized.

As of December 31, 2023, the Company had state and local tax net operating loss carryforwards of $16.3 million, of which $0.1 million expires within one to five years. $7.4 million expires within six to fifteen years, and $8.8 million expires within sixteen years to twenty years. The Company also had state tax credits of $7.7 million, a majority of which will expire in five to six years. As of December 31, 2023, the Company had non-U.S. net operating loss carryforwards of $3.6 million, of which $2.4 million expires over the next 20 years and $1.2 million can be carried forward indefinitely. In addition, the Company also had foreign tax credit carryforwards of $19.2 million, all of which will expire between 2029 and 2033. These amounts have been reduced for associated unrecognized tax benefits, consistent with ASC 740, Income Taxes.

The items comprising the differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate on income before income taxes for the years ended December 31 are summarized in the table below.
 202320222021
Statutory tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit2.1 2.4 2.8 
Effect of non-U.S. operations (0.4)(2.0)(3.4)
Intercompany sale of intellectual property— — (5.6)
Net activity in unrecognized tax benefits
1.3 (1.1)1.3 
Law changes— — 1.3 
Stock-based compensation expense(3.1)(2.0)(2.0)
Limitation on executive compensation2.3 1.4 1.7 
Global intangible low-taxed income, net of foreign tax credits 1.2 1.9 1.7 
Foreign-derived intangible income(0.3)(0.4)(0.3)
Change in the valuation allowance(1.2)0.3 0.4 
Other items, net0.2 (0.1)(0.7)
Effective tax rate23.1 %21.4 %18.2 %

The Company completed intercompany transfers of certain intellectual property in both 2023 and 2021. The 2023 transfer resulted in the recognition of net deferred tax assets of $38.4 million representing tax basis in the acquiring jurisdiction less tax basis in the selling jurisdiction. Full valuation allowances have been established for these assets. No net tax benefit was recognized on the transfer, consistent with the Company's continued expectation that no benefit will be recovered from the tax basis.

The 2021 transfer resulted in recognition of approximately $54.1 million net tax benefits during 2021. These benefits represent the value of future tax deductions for amortization of the assets in the acquiring jurisdiction, net of any tax recognized in the selling jurisdiction. The Company’s intellectual property footprint continues to evolve and may result in tax rate volatility in the future.

As of December 31, 2023 and 2022, the Company had gross unrecognized tax benefits of $148.4 million and $137.2 million, respectively. The increase is primarily due to positions taken with respect to certain intercompany transactions. The gross unrecognized tax benefits at December 31, 2023 related primarily to transfer pricing on intercompany transactions, the exclusion of stock-based compensation expense from the Company’s cost sharing agreement, and the ability to realize certain refund claims. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $8.6 million within the next twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation.
 
Included in the balance of gross unrecognized tax benefits at December 31, 2023 are potential benefits of $139.1 million that, if recognized, would reduce our effective tax rate on income from continuing operations. Also included in the balance of gross unrecognized tax benefits at December 31, 2023 are potential benefits of $9.3 million that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
 
The table below is a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31 (in thousands).
 20232022
Beginning balance$137,227 $150,024 
Additions based on tax positions related to the current year22,822 10,989 
Additions for tax positions of prior years4,361 12,153 
Reductions for tax positions of prior years(14)(485)
Reductions for expiration of statutes(15,625)(30,817)
Settlements(441)(2,177)
Change in foreign currency exchange rates60 (2,460)
Ending balance$148,390 $137,227 

The Company accrues interest and penalties related to gross unrecognized tax benefits in its income tax provision. As of December 31, 2023 and 2022, the Company had $17.4 million and $16.3 million, respectively, of accrued interest and penalties
related to gross unrecognized tax benefits. These amounts are in addition to the gross unrecognized tax benefits disclosed above. The total amount of interest and penalties recognized in the income tax provision during 2023 and 2022 was $1.8 million and $2.4 million, respectively.

The number of years with open statutes of limitation varies depending on the tax jurisdiction. The Company’s statutes are open with respect to the U.S. federal jurisdiction for 2020 and forward, India for 2006 and forward, and Ireland for 2019 and forward. For other major taxing jurisdictions, including U.S. states, the United Kingdom, Canada, Japan, Cyprus, and France, the Company’s statutes vary and are open as far back as 2013.

The Organization for Economic Co-operation and Development (“the OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation, focusing on global profit allocation and a 15% global corporate minimum tax rate.

Several countries in which Gartner does business have proposed or enacted new laws or are actively considering changes to their tax laws to align with OECD proposals. Significant details around the provisions are still uncertain as the OECD and participating countries continue to work on defining the underlying rules and administrative procedures. Enactment of this and similar legislation could significantly increase our tax obligations in countries where we do business. We will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate.
Under U.S. GAAP, no provision for income taxes that may result from the remittance of earnings held overseas is required if the Company has the ability and intent to indefinitely reinvest such funds overseas. The Company continues to assert its intention to reinvest all accumulated undistributed foreign earnings in its non-U.S. operations, except in instances where the repatriation of those earnings would result in minimal additional tax. Consequently, the Company has not recognized income tax expense that would result from the remittance of those earnings. The accumulated undistributed earnings of non-U.S. subsidiaries that have not been previously taxed were approximately $109.1 million as of December 31, 2023.