INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Taxes

Income taxes

NOTE 18 – 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, 2024, 2023, and 2022 (in thousands):

	For the Year Ended
	December 31,
	2024		2023		2022
Domestic	$	3,053,501	$	2,994,856	$	2,786,866
International		(8,437)		9,894		11,789
Income before income taxes	$	3,045,064	$	3,004,750	$	2,798,655

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, 2024, 2023, and 2022 (in thousands):

	For the Year Ended
	December 31,
	2024		2023		2022
Current:
Federal income tax expense	$	587,496	$	497,492	$	455,779
State income tax expense		120,209		109,924		95,388
International income tax expense		446		2,521		5,263
Total current		708,151		609,937		556,430
Deferred:
Federal income tax (benefit) expense		(43,222)		41,782		62,719
State income tax (benefit) expense		(3,229)		6,003		8,583
International income tax (benefit) expense		(3,316)		447		(1,727)
Total deferred		(49,767)		48,232		69,575
Net income tax expense	$	658,384	$	658,169	$	626,005

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, 2024, 2023, and 2022 (in thousands):

	For the Year Ended
	December 31,
	2024		2023		2022
Federal income taxes at statutory rate	$	639,534	$	630,998	$	587,716
State income taxes, net of federal tax benefit		97,459		98,254		87,352
Excess tax benefit from share-based compensation		(39,871)		(35,950)		(25,503)
Benefit from renewable energy tax credits		(28,345)		(19,627)		(17,593)
Other items, net		(10,393)		(15,506)		(5,967)
Total provision for income taxes	$	658,384	$	658,169	$	626,005

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, 2024, 2023, and 2022, the Company recognized investment tax credits in the amount $376.4 million, $336.5 million, and $167.6 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, 2024 and 2023, the Company had recorded a liability for the purchase of transferrable federal renewable energy tax credits in the amount of $346.6 million and $266.0 million, respectively, which were 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, 2024 and 2023 (in thousands):

	December 31,
	2024		2023
Deferred tax assets:
Allowance for doubtful accounts	$	4,161	$	2,430
Other accruals		174,307		150,483
Operating lease liability		589,140		559,830
Net operating loss		5,831		503
Other		17,726		17,599
Total deferred tax assets		791,165		730,845
Deferred tax liabilities:
Inventories		118,712		142,578
Property and equipment		298,804		280,791
Operating lease asset		568,577		540,359
Other		52,671		62,588
Total deferred tax liabilities		1,038,764		1,026,316
Net deferred tax liabilities	$	(247,599)	$	(295,471)

As of December 31, 2024 and 2023, the Company had foreign net operating loss (“NOL”) carryforwards totaling approximately $17.9 million ($5.8 million tax effected) and $1.3 million ($0.5 million tax effected), respectively.  These NOLs will expire, if not utilized, in various years ranging from 2032 to 2034.

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, 2024, 2023, and 2022 (in thousands):

	2024		2023		2022
Unrealized tax benefit, balance at January 1,	$	23,943	$	24,798	$	26,847
Additions based on tax positions related to the current year		3,907		3,932		4,146
Payments related to items settled with taxing authorities		(420)		—		(1,000)
Reductions due to the lapse of statute of limitations and settlements		(4,906)		(4,787)		(5,195)
Unrealized tax benefit, balance at December 31,	$	22,524	$	23,943	$	24,798

For the year ended December 31, 2024, 2023, and 2022, the Company recorded a reserve in the amount of $21.0 million, $21.9 million and $22.4 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, 2024, 2023, and 2022, the Company had accrued approximately $4.0 million, $3.9 million and $3.5 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, 2024, 2023, and 2022, the Company recorded tax expense related to an increase in its liability for interest and penalties in the amounts of $2.4 million, $2.1 million and $1.5 million, respectively.  Although unrecognized tax benefits for individual tax positions may increase or decrease during 2025, the Company expects a reduction of $7.5 million of unrecognized tax benefits during the one-year period subsequent to December 31, 2024, resulting from settlement or expiration of the statute of limitations.

The Company’s United States federal income tax returns for tax years 2021 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 2013 through 2023.