INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Taxes

Income taxes

NOTE 15 – INCOME TAXES

The following table identifies components of income from continuing operations before income taxes included in “Income before income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	For the Year Ended
	December 31,
	2022		2021		2020
Domestic	$	2,786,866	$	2,770,485	$	2,260,385
International		11,789		11,429		6,020
Income before income taxes	$	2,798,655	$	2,781,914	$	2,266,405

Provision for income taxes:

The following tables reconcile the amounts included in “Provision for income taxes” on the accompanying Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	For the Year Ended
	December 31,
	2022		2021		2020
Current:
Federal income tax expense	$	455,779	$	485,988	$	401,331
State income tax expense		95,388		104,837		97,085
International income tax expense		5,263		6,021		3,306
Total current		556,430		596,846		501,722
Deferred:
Federal income tax expense		62,719		20,543		16,749
State income tax expense (benefit)		8,583		2,432		(2,865)
International income tax benefit		(1,727)		(2,592)		(1,503)
Total deferred		69,575		20,383		12,381
Net income tax expense	$	626,005	$	617,229	$	514,103

The following table outlines the reconciliation of the “Provision for income taxes” amounts included on the accompanying Consolidated Statements of Income to the amounts computed at the federal statutory rate for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	For the Year Ended
	December 31,
	2022		2021		2020
Federal income taxes at statutory rate	$	587,716	$	584,202	$	474,681
State income taxes, net of federal tax benefit		87,352		90,360		76,810
Excess tax benefit from share-based compensation		(25,503)		(35,202)		(16,918)
Benefit from investment in renewable energy tax credits		(17,593)		(18,592)		(17,904)
Other items, net		(5,967)		(3,539)		(2,566)
Total provision for income taxes	$	626,005	$	617,229	$	514,103

The Company has invested in tax credit equity investments for the purposes of receiving renewable energy tax credits.  During the years ended December 31, 2022, 2021 and 2020, the Company recognized investment tax credits in the amount of $167.6 million, $177.1 million and $170.5 million, respectively, all of which were realized through reductions in cash income taxes paid and were reflected as a component of the change in Income taxes payable on the accompanying Consolidated Statements of Cash Flows for the respective years.  See Note 1 for further information concerning the Company’s investment in tax credit funds.

Deferred income tax assets and liabilities:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and also include the tax effect of carryforwards.

The following table identifies significant components of the Company’s net deferred tax liabilities included in “Deferred income taxes” on the accompanying Consolidated Balance Sheets as of December 31, 2022 and 2021 (in thousands):

	December 31,
	2022		2021
Deferred tax assets:
Allowance for doubtful accounts	$	2,196	$	1,538
Tax credits		—		284
Other accruals		137,474		142,714
Operating lease liability		538,890		513,492
Other		17,115		16,117
Total deferred tax assets		695,675		674,145
Deferred tax liabilities:
Inventories		104,572		64,562
Property and equipment		233,288		212,649
Operating lease asset		521,541		496,996
Other		81,621		75,150
Total deferred tax liabilities		941,022		849,357
Net deferred tax liabilities	$	(245,347)	$	(175,212)

Unrecognized tax benefits:

The following table summarizes the changes in the gross amount of unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2022, 2021 and 2020 (in thousands):

	2022		2021		2020
Unrealized tax benefit, balance at January 1,	$	26,847	$	30,967	$	31,475
Additions based on tax positions related to the current year		4,146		5,446		4,795
Payments related to items settled with taxing authorities		(1,000)		(2,570)		—
Reductions due to the lapse of statute of limitations and settlements		(5,195)		(6,996)		(5,303)
Unrealized tax benefit, balance at December 31,	$	24,798	$	26,847	$	30,967

For the years ended December 31, 2022, 2021 and 2020, the Company recorded a reserve for unrecognized tax benefits, including interest and penalties, in the amounts of $28.3 million, $30.7 million and $35.9 million, respectively.  The timing related to the ultimate resolution or settlement of these uncertain tax positions cannot be determined.  All of the unrecognized tax benefits recorded as of December 31, 2022, 2021 and 2020, respectively, would affect the Company’s effective tax rate if recognized, generally net of the federal tax effect of approximately $6.2 million.  The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  As of December 31, 2022, 2021 and 2020, the Company had accrued approximately $3.5 million, $3.8 million and $5.0 million, respectively, of interest and penalties related to uncertain tax positions before the benefit of the deduction for interest on state and federal returns.  During the years ended December 31, 2022, 2021 and 2020, the Company recorded tax expense related to an increase in its liability for interest and penalties in the amounts of $1.5 million, $1.6 million and $2.2 million, respectively.  Although unrecognized tax benefits for individual tax positions may increase or decrease during 2023, the Company expects a reduction of $5.7 million of unrecognized tax benefits during the one-year period subsequent to December 31, 2022, resulting from settlement or expiration of the statute of limitations.

The Company’s United States federal income tax returns for tax years 2019 and beyond remain subject to examination by the Internal Revenue Service.  The Company’s state income tax returns remain subject to examination by various state authorities for tax years ranging from 2011 through 2021.