Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes [Text Block]

Income Taxes

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

(thousands)	2022		2021		2020
Current:
Federal	$	139,730	$	68,555	$	5,085
State	29,117		18,418		7,114
International	293,195		214,184		130,883
	$	462,042	$	301,157	$	143,082
Deferred:
Federal	$	(39,658)	$	(347)	$	13,496
State	(5,613)		(388)		4,603
International	32,221		25,484		11,614
	(13,050)		24,749		29,713
	$	448,992	$	325,906	$	172,795

The principal causes of the difference between the U.S. federal statutory tax rate of 21% and effective income tax rates for the years ended December 31 are as follows:

(thousands)	2022		2021		2020
United States	$	517,642	$	339,499	$	104,637
International	1,366,508		1,096,875		654,622
Income before income taxes	$	1,884,150	$	1,436,374	$	759,259
Provision at statutory tax rate	$	395,672	$	301,638	$	159,444
State taxes, net of federal benefit	18,675		14,162		10,218
International effective tax rate differential	26,210		(5,402)		3,112
U.S. tax on foreign earnings	3,879		10,289		5,316
Tax expense on wind down of business (a)	—		—		1,937
Change in valuation allowance	(6,378)		(1,723)		2,906
Other non-deductible expenses	7,441		9,058		2,600
Changes in tax accruals	5,993		9,937		3,089
Tax credits	980		(17,555)		(16,075)
Other	(3,480)		5,502		248
Provision for income taxes	$	448,992	$	325,906	$	172,795

(a)The wind down of the company’s personal computer and mobility asset disposition business resulted in net tax expense of $1.9 million during 2020.

The company is subject to taxation of global intangible low-taxed income (“GILTI”) on foreign subsidiaries and a tax provision to deduct a portion of foreign-derived intangible income (“FDII”) of U.S. corporations. GILTI tax expense, accounted for as a current period cost, net of FDII benefit, resulted in a net tax expense (benefit) of $(7.4) million, $(12.3) million, and $0.2 million during 2022, 2021, and 2020, respectively.

As of December 31, 2022, a long-term tax payable of $24.2 million was recorded in “Other liabilities” in the consolidated balance sheets for a one-time transition tax on the foreign subsidiaries' accumulated unremitted earnings related to the 2017 U.S. Tax Cuts and Jobs Act.

At December 31, 2022, the company had a liability for unrecognized tax position of $75.7 million. The timing of the resolution of these uncertain tax positions is dependent on the tax authorities' income tax examination processes. Material changes are not expected; however, it is possible that the amount of unrecognized tax benefits with respect to uncertain tax

positions could increase or decrease during 2023. Currently, the company is unable to make a reasonable estimate of when tax cash settlement would occur and how it would impact the effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:

(thousands)	2022		2021		2020
Balance at beginning of year	$	71,422	$	62,203	$	52,986
Additions based on tax positions taken during a prior period	6,760		2,528		8,574
Reductions based on tax positions taken during a prior period	(3,007)		(1,542)		(1,749)
Additions based on tax positions taken during the current period	3,526		9,326		5,174
Reductions based on tax positions taken during the current period	—		(370)		(831)
Reductions related to settlement of tax matters	(2,271)		(692)		(538)
Reductions related to a lapse of applicable statute of limitations	(764)		(31)		(1,413)
Balance at end of year	$	75,666	$	71,422	$	62,203

Interest costs related to unrecognized tax benefits are classified as a component of “Interest and other financing expense, net” in the company's consolidated statements of operations. In 2022, 2021, and 2020, the company recognized $4.4 million, $1.3 million, and $1.9 million, respectively, of interest expense related to unrecognized tax benefits. At December 31, 2022 and 2021, the company had accrued a liability of $13.5 million and $9.1 million, respectively, for interest related to unrecognized tax benefits.

In many cases the company'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, 2022:

United States - Federal	2016 - present
United States - States	2015 - present
Germany (a)	2015 - present
China and Hong Kong	2015 - present
Italy (a)	2013 - present
Netherlands	2017 - present
Sweden	2015 - present
Taiwan	2017 - present
United Kingdom	2018 - present

(a) Includes federal as well as local jurisdictions.

Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.

Deferred tax assets and liabilities consist of the following at December 31:

(thousands)	2022		2021
Deferred tax assets:
Net operating loss carryforwards	$	18,409	$	50,015
Capital loss carryforwards	56,618		57,102
Inventory adjustments	46,188		55,755
Allowance for doubtful accounts	25,779		21,382
Accrued expenses	35,940		43,995
Interest carryforward	4,014		11,160
Stock-based compensation awards	7,559		6,981
Lease liability	71,415		69,856
Research and experimentation costs (a)	33,426		—
Other	—		6,291
	299,348		322,537
Valuation allowance	(75,842)		(82,220)
Total deferred tax assets	$	223,506	$	240,317
Deferred tax liabilities:
Goodwill	$	(144,287)	$	(135,285)
Depreciation	(76,527)		(96,097)
Intangible assets	(3,042)		(8,429)
Lease right-of-use assets	(66,775)		(64,902)
Other comprehensive income items	(9,842)		—
Other	(3,002)		—
Total deferred tax liabilities	$	(303,475)	$	(304,713)
Total net deferred tax assets (liabilities)	$	(79,969)	$	(64,396)

(a)     At December 31, 2022, the company recorded deferred tax asset of $33.4 million related to capitalized U.S. based research and experimental (“R&E”) costs, pursuant to the U.S. Internal Revenue Code Section 174, as amended by the 2017 U.S. Tax Cuts and Jobs Act.

At December 31, 2022, the company had international tax loss carryforwards of approximately $37.1 million, of which $3.8 million have expiration dates ranging from 2023 to 2042, and the remaining $33.3 million have no expiration date. Deferred tax assets related to these international tax loss carryforwards were $9.8 million with a corresponding valuation allowance of $2.5 million. At December 31, 2022, the company had a valuation allowance of $3.6 million related to other deferred tax assets.

At December 31, 2022, the company also had deferred tax assets of $0.1 million related to U.S. Federal net operating loss carryforwards from acquired subsidiaries. These U.S. Federal net operating losses expire in various years beginning after 2028. Additionally, as of December 31, 2022, the company had deferred tax assets of approximately $8.5 million with a corresponding valuation allowance of $7.9 million, related to U.S. state net operating loss carryforwards. Valuation allowances are needed when deferred tax assets may not be realized due to the uncertainty of the timing and the ability of the company to generate sufficient future taxable income in certain tax jurisdictions.

The company has $3.3 billion of undistributed earnings of its foreign subsidiaries which it deems indefinitely reinvested, and recognizes that it may be subject to additional foreign taxes and U.S. state income taxes, if it reverses its indefinite reinvestment assertion on these foreign earnings. The company has $2.1 billion of foreign earnings that are not deemed permanently reinvested and are available for distribution in future periods as of December 31, 2022, after distributions of $53.6 million and $349.0 million during 2021 and 2020, respectively.

Income taxes paid, net of income taxes refunded, amounted to $384.4 million, $221.1 million, and $160.1 million in 2022, 2021, and 2020, respectively.