INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Taxes

Income taxes

NOTE 16 – 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, 2023, 2022, and 2021 (in thousands):

	For the Year Ended
	December 31,
	2023		2022		2021
Domestic	$	2,994,856	$	2,786,866	$	2,770,485
International		9,894		11,789		11,429
Income before income taxes	$	3,004,750	$	2,798,655	$	2,781,914

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, 2023, 2022, and 2021 (in thousands):

	For the Year Ended
	December 31,
	2023		2022		2021
Current:
Federal income tax expense	$	497,492	$	455,779	$	485,988
State income tax expense		109,924		95,388		104,837
International income tax expense		2,521		5,263		6,021
Total current		609,937		556,430		596,846
Deferred:
Federal income tax expense		41,782		62,719		20,543
State income tax expense		6,003		8,583		2,432
International income tax expense (benefit)		447		(1,727)		(2,592)
Total deferred		48,232		69,575		20,383
Net income tax expense	$	658,169	$	626,005	$	617,229

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, 2023, 2022, and 2021 (in thousands):

	For the Year Ended
	December 31,
	2023		2022		2021
Federal income taxes at statutory rate	$	630,998	$	587,716	$	584,202
State income taxes, net of federal tax benefit		98,254		87,352		90,360
Excess tax benefit from share-based compensation		(35,950)		(25,503)		(35,202)
Benefit from renewable energy tax credits		(19,627)		(17,593)		(18,592)
Other items, net		(15,506)		(5,967)		(3,539)
Total provision for income taxes	$	658,169	$	626,005	$	617,229

The Company has invested in tax credit equity investments for the purposes of receiving renewable energy tax credits and purchased transferrable federal renewable energy tax credits.  During the year ended December 31, 2023, 2022, and 2021, the Company recognized investment tax credits in the amount of $336.5 million, $167.6 million and $177.1 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.  As of December 31, 2023, the Company had recorded a liability for the purchase of transferrable federal renewable energy tax credits of $266.0 million, which was included in “Other current liabilities” on the accompanying Consolidated Balance Sheets.  See Note 1 for further information concerning the Company’s investment in tax credit funds.

Income taxes have not been accrued by the Company for the unremitted earnings of its foreign subsidiaries because such earnings are intended to be reinvested in the subsidiaries indefinitely.

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, 2023 and 2022 (in thousands):

	December 31,
	2023		2022
Deferred tax assets:
Allowance for doubtful accounts	$	2,430	$	2,196
Other accruals		150,483		137,474
Operating lease liability		559,830		538,890
Other		18,102		17,115
Total deferred tax assets		730,845		695,675
Deferred tax liabilities:
Inventories		142,578		104,572
Property and equipment		280,791		233,288
Operating lease asset		540,359		521,541
Other		62,588		81,621
Total deferred tax liabilities		1,026,316		941,022
Net deferred tax liabilities	$	(295,471)	$	(245,347)

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, 2023, 2022, and 2021 (in thousands):

	2023		2022		2021
Unrealized tax benefit, balance at January 1,	$	24,798	$	26,847	$	30,967
Additions based on tax positions related to the current year		3,932		4,146		5,446
Payments related to items settled with taxing authorities		—		(1,000)		(2,570)
Reductions due to the lapse of statute of limitations and settlements		(4,787)		(5,195)		(6,996)
Unrealized tax benefit, balance at December 31,	$	23,943	$	24,798	$	26,847

For the year ended December 31, 2023, 2022, and 2021, the Company recorded a reserve in the amount of $21.9 million, $22.4 million and $24.2 million, respectively, for unrecognized tax benefits, including interest and penalties, net of federal benefits, which if recognized would affect the Company’s effective tax rate.  The timing related to the ultimate resolution or settlement of these uncertain tax positions cannot be determined.  The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.  As of December 31, 2023, 2022, and 2021, the Company had accrued approximately $3.9 million, $3.5 million and $3.8 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 year ended December 31, 2023, 2022, and 2021, the Company recorded tax expense related to an increase in its liability for interest and penalties in the amounts of $2.1 million, $1.5 million and $1.6 million, respectively.  Although unrecognized tax benefits for individual tax positions may increase or decrease during 2024, the Company expects a reduction of $7.3 million of unrecognized tax benefits during the one-year period subsequent to December 31, 2023, resulting from settlement or expiration of the statute of limitations.

The Company’s United States federal income tax returns for tax years 2020 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 2012 through 2022.