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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. We record a valuation allowance to reduce our deferred tax assets to the amount that is more-likely-than-not to be realized. In assessing the need for a valuation allowance, we consider future taxable income and ongoing prudent and feasible tax planning strategies. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged to income in the period such determination was made.

We record a liability for uncertain tax positions that do not meet the more-likely-than-not standard as prescribed by the authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more-likely-than-not be sustained. Unrecognized tax benefits are the differences between tax positions taken, or expected to be taken, in tax returns, and the benefits recognized for accounting purposes. We classify uncertain tax positions as long-term liabilities.

Significant judgment is required in determining our worldwide provision for income taxes and our income tax filings are regularly under audit by tax authorities. Any audit result differing from amounts recorded would increase or decrease income in the period that we determine such adjustment is likely. Interest expense and penalties associated with the underpayment of income taxes are included in income tax expense.
Earnings before income taxes were as follows:
(in thousands)For the Years Ended December 31,
202420232022
   
Domestic$897,336 $889,133 $684,661 
International212,495 172,043 175,311 
$1,109,831 $1,061,176 $859,972 

The provision (benefit) for income taxes comprised the following:
(in thousands)For the Years Ended December 31,
202420232022
Current   
Federal$168,042 $191,274 $150,099 
State37,112 40,369 30,529 
International41,004 32,797 35,138 
246,158 264,440 215,766 
Deferred
Federal(24,642)(36,501)(31,663)
State(4,709)(6,462)(5,735)
International5,157 (5,343)2,515 
(24,194)(48,306)(34,883)
$221,964 $216,134 $180,883 

The provision for income taxes differs from the amounts computed by applying the statutory federal income tax rate as follows:
For the Years Ended December 31,
202420232022
   
U.S. federal statutory rate21.0 %21.0 %21.0 %
State income tax, net of federal tax benefit2.4 2.7 2.3 
Taxation on international earnings(0.2)(0.1)0.6 
Foreign derived intangible income(1.3)(1.4)(1.7)
Share-based compensation from settlements(1.8)(1.3)(1.5)
Research and development credit(1.0)(1.2)(1.1)
Other, net0.9 0.7 1.4 
Effective tax rate20.0 %20.4 %21.0 %

Our effective income tax rate was 20.0% for the year ended December 31, 2024, and 20.4% for the year ended December 31, 2023. Our effective tax rate for the year ended December 31, 2024, was lower primarily due to increased benefits related to share-based compensation.

Income taxes paid, net of refunds received, for the periods ended December 31, 2024, 2023, and 2022, were $307.2 million, $192.5 million, and $239.8 million, respectively.

We have determined that unremitted earnings are not indefinitely reinvested to the extent they can be distributed without incurring a significant tax liability. As such, we have recorded a deferred tax liability for foreign withholding tax that will be incurred with respect to the unremitted earnings upon repatriation. We consider all other outside basis differences to be indefinitely reinvested to the extent reversal would incur a significant tax liability. It is not practicable to calculate a deferred tax liability related to such outside basis differences.
The components of the net deferred tax assets (liabilities) included in the accompanying consolidated balance sheets are as follows:
(in thousands)December 31, 2024December 31, 2023
  
Assets  
Accrued expenses$56,325 $44,043 
Accounts receivable reserves3,444 2,700 
Deferred revenue5,743 6,427 
Inventory basis differences24,040 24,500 
Property-based differences16,802 18,036 
Intangible asset basis differences41,628 47,089 
Share-based compensation14,335 12,061 
Other1,878 2,267 
Net operating loss carryforwards6,647 9,007 
Tax credit carryforwards13,382 12,824 
Unrealized losses on foreign currency exchange contracts and investments1,357 821 
Research and development expenditure differences92,856 66,705 
Total assets278,437 246,480 
Valuation allowance(31,927)(34,793)
Total assets, net of valuation allowance246,510 211,687 
Liabilities
Customer acquisition costs(46,892)(39,318)
Property-based differences(53,332)(52,235)
Intangible asset basis differences(10,443)(6,335)
Other(14,867)(11,639)
Unrealized gains on foreign currency exchange contracts and investments(6,658)(1,813)
Total liabilities(132,192)(111,340)
Net deferred tax assets$114,318 $100,347 

As of December 31, 2024, we recorded valuation allowances against certain deferred tax assets related to temporary differences, including intangible asset basis differences, net operating loss (“NOL”), and tax credit carryforwards, as it is more-likely-than-not that they will not be realized or utilized within the carryforward period.

The following table summarizes the changes in valuation allowance for deferred tax assets:

(in thousands)For the Years Ended December 31,
202420232022
   
Balance at beginning of year$34,793 $39,726 $39,280 
Charges to costs and expense
698 21 2,200 
Write-off/cash payments(1,289)(7,846)(1,537)
Foreign currency translation(2,275)2,892 (217)
Balance at the end of the year$31,927 $34,793 $39,726 

As of December 31, 2024, we have NOLs in certain state and international jurisdictions of approximately $29.5 million available to offset future taxable income. Most of these NOL carryforwards will expire at various dates between 2025 and 2031 and the remainder have indefinite lives. At December 31, 2024, we also had state tax credit carryforwards of $16.9 million that will expire between 2029 and 2044.
The following table summarizes the changes in unrecognized tax positions:
(in thousands)For the Years Ended December 31,
202420232022
   
Total amounts of unrecognized tax benefits, beginning of period$22,320 $22,547 $21,789 
Gross increases in unrecognized tax positions as a result of tax positions taken during a prior period
41 6,366 342 
Gross increases in unrecognized tax positions as a result of tax positions taken in the current period3,034 3,987 3,197 
Decreases in unrecognized tax positions related to settlements with taxing authorities
(678)(7,535)(1,544)
Decreases in unrecognized tax positions as a result of a lapse of the applicable statutes of limitations(6,571)(3,045)(1,237)
Total amounts of unrecognized tax benefits, end of period$18,146 $22,320 $22,547 

Of the total unrecognized tax benefits as of December 31, 2024, and 2023, $17.4 million and $21.2 million, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate. Unrecognized tax benefits of approximately $3.2 million are subject to the lapse in the statutes of limitations during 2025 in various U.S. and international tax jurisdictions.

During the years ended December 31, 2024, 2023, and 2022, we recorded interest expense and penalties related to income taxes of $1.7 million, $2.9 million, and $1.3 million, respectively, as income tax expense in our consolidated statements of income. As of December 31, 2024, 2023, and 2022, we had $2.9 million, $3.8 million, and $4.2 million, respectively, of estimated interest expense and penalties accrued in our consolidated balance sheets.

In the ordinary course of our business, our income tax filings are regularly under audit by tax authorities. While we believe we have appropriately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of previously accrued provisions, could be recorded in the future as we revise our estimates due to changing facts and circumstances or the underlying matters are settled or otherwise resolved. We are currently under tax examinations in various jurisdictions. We anticipate that these examinations will be concluded within the next two years. With few exceptions, we are no longer subject to income tax examinations for years before 2015 in any jurisdiction in which we conduct significant taxable activities.