INCOME TAXES

6 Months Ended

Jun. 30, 2023

INCOME TAXES

INCOME TAXES

NOTE E – INCOME TAXES

The Company’s total effective tax rate was 18.8% and 22.3% for the three and six months ended June 30, 2023, respectively, compared to 23.0% and 23.6% for the same periods of 2022, including discontinued operations which are further discussed in Note C. The effective tax rate from continuing operations was 18.6% and 19.1% for the three and six months ended June 30, 2023, respectively, compared to 22.9% and 23.6% for the same periods of 2022. 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 and six months ended June 30, 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 rates for the three and six months ended June 30, 2023, were also impacted by the reinstatement of the federal alternative fuel tax credit.

As of June 30, 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 June 30, 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 $1.8 million and $1.7 million at June 30, 2023 and December 31, 2022, respectively.

The Company paid federal, state, and foreign income taxes of $77.8 million and $56.4 million during the six months ended June 30, 2023 and 2022, respectively. The Company received refunds of federal and state income taxes that were paid in prior years of $1.7 million and $1.2 million during the six months ended June 30, 2023 and 2022, respectively.

Income tax expense reflected in discontinued operations is $0.3 million, or an effective tax rate of 25.5%, and $18.3 million, or an effective tax rate of 25.5%, for the three and six months ended June 30, 2023, respectively, which primarily consisted of federal and state income taxes on the gain on the sale of FleetNet. For the three and six months ended June 30, 2022, income tax expense reflected in discontinued operations is $0.4 million, or an effective tax rate of 30.2%, and $0.8 million, or an effective tax rate of 25.1%, respectively.