Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

Note 11. Income Taxes

Reliance and its subsidiaries file numerous consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. We are no longer subject to U.S. federal tax examinations for years before 2019 and state and local tax examinations before 2018. Significant components of the provision for income taxes attributable to continuing operations were as follows:

	Year Ended December 31,
	2022		2021		2020
	(in millions)
Current:
Federal	$	418.9	$	362.9	$	77.6
State		112.9		98.0		24.9
Foreign		61.1		28.6		17.0
		592.9		489.5		119.5
Deferred:
Federal		(3.7)		(20.2)		(7.1)
State		(2.0)		(4.0)		0.3
Foreign		(1.0)		0.4		(6.9)
		(6.7)		(23.8)		(13.7)
	$	586.2	$	465.7	$	105.8

Components of U.S. and international income before income taxes were as follows:

	Year Ended December 31,
	2022		2021		2020
	(in millions)
U.S.	$	2,199.2	$	1,778.5	$	465.9
International		231.2		104.6		12.3
Income before income taxes	$	2,430.4	$	1,883.1	$	478.2

The reconciliation of income tax at the U.S. federal statutory tax rate to income tax expense is as follows:

	Year Ended December 31,
	2022		2021		2020
Income tax at U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State income tax, net of federal tax effect	3.5		3.8		3.6
Foreign earnings taxed at higher rates	0.5		0.4		1.0
Net effect of life insurance policies	(0.6)		(0.8)		(2.9)
Net effect of changes in unrecognized tax benefits	—		0.1		(0.3)
Stock-based compensation	—		0.3		0.8
Other, net	(0.3)		(0.1)		(1.1)
Effective tax rate	24.1	%	24.7	%	22.1	%

Significant components of our deferred tax assets and liabilities are as follows:

	December 31,
	2022		2021
	(in millions)
Deferred tax assets:
Allowance for doubtful accounts	$	6.6	$	6.6
Inventory costs capitalized for tax purposes		12.0		12.9
LIFO inventories		0.7		—
Accrued expenses not currently deductible for tax		29.2		36.9
Stock-based compensation		11.1		10.1
Net operating loss carryforwards		3.2		3.9
Tax credits carryforwards		0.7		0.9
Total deferred tax assets		63.5		71.3
Deferred tax liabilities:
Property, plant and equipment, net		(196.8)		(183.1)
Goodwill and other intangible assets		(340.9)		(342.0)
LIFO inventories		—		(25.0)
Other		(2.4)		(6.0)
Total deferred tax liabilities		(540.1)		(556.1)
Net deferred tax liabilities	$	(476.6)	$	(484.8)

As of December 31, 2022, we had $3.6 million of state and $0.4 million of acquired federal net operating loss carryforwards (“NOLs”), which are available to offset future income taxes. The state and federal NOLs expire in various years from 2023 through 2042, if not utilized. We believe that it is more likely than not that we will be able to realize these NOLs within their respective carryforward periods.

The Company believes it is more likely than not that it will generate sufficient future taxable income to realize its deferred tax assets.

Unrecognized Tax Benefits

We are under audit by various state jurisdictions for years 2017 through 2019, but do not anticipate any material adjustments from these examinations. Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2022		2021		2020
	(in millions)
Unrecognized tax benefits at January 1	$	1.9	$	1.0	$	2.2
Increases in tax positions for prior years		0.8		—		—
Increases in tax positions for current year		—		1.0		—
Settlements		(0.8)		—		(1.1)
Lapse of statute of limitations		(0.5)		(0.1)		(0.1)
Unrecognized tax benefits at December 31	$	1.4	$	1.9	$	1.0

As of December 31, 2022, $1.4 million of unrecognized tax benefits would impact the effective tax rate if recognized. Accrued interest and penalties, net of applicable tax effect, related to uncertain tax positions were $0.3 million and $0.7

million as of December 31, 2022 and 2021, respectively. Although the timing, settlement or closure of audits is not certain, we do not anticipate our unrecognized tax benefits will increase or decrease significantly over the next twelve months.