INCOME TAXES

3 Months Ended

Mar. 31, 2023

INCOME TAXES

INCOME TAXES

NOTE E – INCOME TAXES

The Company’s total effective tax rate was 24.1% and 24.6% for the three months ended March 31, 2023 and 2022, respectively, including discontinued operations which are further discussed in Note C. The effective tax rate from continuing operations was 20.0% and 24.7% for the three months ended March 31, 2023 and 2022, respectively. State tax rates vary among states and average approximately 6.0% to 6.5%, although some state rates are higher, and a small number of states do not impose an income tax.

For the three months ended March 31, 2023 and 2022, the difference between the Company’s effective tax rate from continuing operations and the federal statutory rate resulted from state income taxes, nondeductible expenses, changes in the cash surrender value of life insurance, the federal research and development tax credit, changes in tax valuation allowances, and the tax benefit from the vesting of stock awards. The Company’s effective tax rate for the three months ended March 31, 2023, was also impacted by the reinstatement of the federal alternative fuel tax credit.

As of March 31, 2023, the Company’s deferred tax liabilities, which will reverse in future years, exceeded the deferred tax assets. The Company evaluated the total deferred tax assets at March 31, 2023, and concluded that, other than for certain deferred tax assets related to foreign and state tax credit carryforwards and state net operating losses, the assets did not exceed the amount for which realization is more likely than not. In making this determination, the Company considered the future reversal of existing taxable temporary differences, future taxable income, and tax planning strategies. Valuation allowances for deferred tax assets totaled $1.7 million at both March 31, 2023 and December 31, 2022.

For the three months ended March 31, 2023, the Company paid federal, state, and foreign income taxes of $27.7 million and received refunds of $1.6 million of federal and state income taxes that were paid in prior years. For the three months ended March 31, 2022, the Company paid federal and state income taxes of $27.2 million and received refunds of less than $0.1 million that were paid in prior years.

Income tax expense reflected in discontinued operations is $18.0 million, or an effective tax rate of 25.5%, for the three months ended March 31, 2023, which primarily consisted of federal and state income taxes on the gain on the sale of FleetNet, and $0.4 million, or an effective tax rate of 21.7%, for the three months ended March 31, 2022.