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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) from continuing operations before income taxes consist of the following:
Year ended December 31,202120202019
Income (loss) from continuing operations before income taxes:
U.S.$231,424 $80,632 $(32,953)
Foreign45,330 29,276 4,234 
Income (loss) from continuing operations before income taxes$276,754 $109,908 $(28,719)
The income tax provision (benefit) consists of the following:
Year ended December 31,202120202019
Current tax provision (benefit):
Federal$54,087 $(4,430)$2,501 
State15,961 6,527 197 
Foreign14,853 4,172 8,569 
Total current tax provision84,901 6,269 11,267 
Deferred tax provision (benefit):
Federal(22,046)16,512 (6,150)
State(4,175)(1,132)(1,575)
Foreign(3,515)185 (9,677)
Total deferred tax provision (benefit)(29,736)15,565 (17,402)
Total income tax provision (benefit)$55,165 $21,834 $(6,135)
A reconciliation of the federal statutory rate to our effective income tax rate is shown below:
Year ended December 31,202120202019
Federal statutory rate21.0 %21.0 %21.0 %
Increases (decreases) in the rate resulting from:
Net capital loss on Divestiture(1.0)%(24.8)%— %
Tax reform(1.2)%(11.4)%— %
Unrecognized tax benefits0.1 %5.0 %(5.0)%
State income taxes, net of federal income tax impact3.1 %3.2 %6.6 %
Research and development credit(0.8)%(2.9)%9.8 %
Foreign income taxes0.3 %0.7 %(3.7)%
Valuation allowance1.1 %27.1 %(1.4)%
Restricted stock vestings(2.1)%1.0 %(6.7)%
Nondeductible compensation1.0 %— %— %
Foreign derived intangible income (FDII)(3.2)%— %— %
Other1.6 %1.0 %0.8 %
Effective income tax rate19.9 %19.9 %21.4 %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
December 31,20212020
Deferred tax assets:
Employee benefit plans$40,121 $28,546 
Accrued liabilities not currently deductible24,659 23,872 
Finance charges2,019 1,928 
Lease liabilities57,056 43,342 
Allowance for losses on accounts receivable3,370 3,629 
Net operating loss carryforwards4,985 4,924 
Capital loss carryover30,323 27,624 
Interest limitation206 1,502 
Derivatives— 7,920 
    Other4,694 5,733 
Total deferred tax assets167,433 149,020 
Less: valuation allowances(34,706)(31,709)
Net deferred tax assets132,727 117,311 
Deferred tax liabilities:
Merchandise inventories32,261 42,509 
Goodwill2,759 1,603 
Property and equipment32,607 34,005 
Right-of-use assets52,755 39,514 
Computer software8,068 7,447 
Insurance1,040 1,108 
Intangible assets21,953 27,349 
Withholding tax liabilities7,072 7,451 
Other101 344 
Total deferred tax liabilities158,616 161,330 
Net deferred tax liability$(25,889)$(44,019)
The valuation allowances relate to deferred tax assets for U.S. federal and state capital loss carryforwards and net operating loss carryforwards in various state jurisdictions. The U.S. capital loss carryforward, which has a full valuation allowance, has an expiration date of five years. The capital loss and net operating loss carryforwards in various state jurisdictions have various expiration dates ranging from five years to an unlimited carryforward period. Based on management’s judgment using available evidence about historical and expected future taxable earnings, management believes it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2021.
Cash payments for income taxes, including interest, for 2021, 2020 and 2019 were $102 million, $15.4 million and $18.1 million. Cash tax refunds received for 2021, 2020 and 2019 were $2.5 million, $32.8 million and $24.3 million.
A summary of the changes in the liability for unrecognized tax benefits from the beginning to the end of the reporting period is as follows:
20212020
Unrecognized tax benefits at January 1,$20,770 $11,520 
Increases for positions taken during current period858 1,488 
Increases for positions taken during prior periods2,422 9,073 
Lapse of statute of limitations(2,665)(1,311)
Unrecognized tax benefits at December 31,$21,385 $20,770 
Included in the liability for unrecognized tax benefits at December 31, 2021 and 2020, were $2.7 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such
deductibility. These tax positions are temporary differences which do not impact the annual effective tax rate under deferred tax accounting. Any change in the deductibility period of these tax positions would impact the timing of cash payments to taxing jurisdictions. Unrecognized tax benefits of $18.7 million and $18.0 million at December 31, 2021 and 2020 would impact our effective tax rate if recognized.
We recognize accrued interest and penalties related to unrecognized tax benefits. Accrued interest at December 31, 2021 and 2020 was $2.9 million and $2.6 million. The amounts recognized in interest expense for the years ended December 31, 2021, 2020 and 2019 were $0.3 million, $1.3 million and $0.7 million. There were no penalties accrued at December 31, 2021 and 2020 or recognized in 2021, 2020 and 2019.
On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service (IRS) regarding our 2015 and 2016 consolidated income tax returns. On June 30, 2021, we received a NOPA from the IRS regarding our 2017 and 2018 consolidated income tax returns. Within the NOPAs, the IRS has asserted that our taxable income for the aforementioned years should be higher based on their assessment of the appropriate amount of taxable income that we should report in the United States in connection with our sourcing of products by our foreign subsidiaries for sale in the United States by our domestic subsidiaries. Our amount of taxable income in the United States is based on our transfer pricing methodology, which has been consistently applied through the current date. We strongly disagree with the IRS position and will pursue all available administrative and judicial remedies, including those available under the U.S. - Ireland Income Tax Treaty to alleviate double taxation. We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves. We believe that we have adequately reserved for this matter and that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows. However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax, interest, and any potential penalties could have a material adverse impact on our financial position, results of operations or cash flows.
We file income tax returns in the U.S. federal and various state and foreign jurisdictions. Our U.S. federal income tax returns for the years 2015 through 2020 are subject to examination. Our income tax returns for U.S. state and local jurisdictions are generally open for the years 2018 through 2020; however, certain returns may be subject to examination for differing periods. The former owners are contractually obligated to indemnify us for all income tax liabilities incurred by Byram entities prior to its acquisition on August 1, 2017, and for all income tax liabilities incurred by the Halyard foreign entities located in Thailand, Mexico, and Honduras prior to its acquisition on April 30, 2018.