Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

The components of income before taxes from continuing operations consisted of the following for the years ended December 31 (in thousands):

	2022		2021		2020
Domestic	$	112,635	$	93,155	$	108,930
Foreign	(1,145)		6,407		(1,171)
Income before taxes from continuing operations	$	111,490	$	99,562	$	107,759

The provision for income taxes from continuing operations for the years ended December 31 consisted of the following (in thousands):

	2022		2021		2020
Current:
U.S. Federal	$	17,014	$	16,137	$	16,505
State	5,647		5,009		4,071
Foreign	86		932		106
Total current	22,747		22,078		20,682
Deferred:
U.S. Federal	5,259		1,766		3,620
State	1,381		134		672
Foreign	(303)		1,068		(506)
Total deferred	6,337		2,968		3,786
Provision for income taxes	$	29,084	$	25,046	$	24,468

The provision for income taxes from discontinued operations for the years ended December 31 consisted of the following (in thousands):

	2022		2021		2020
Current:
U.S. Federal	$	—	$	362	$	1,345
State	—		139		57
Foreign	—		214		1,725
Total current	—		715		3,127
Deferred:
U.S. Federal	—		(340)		(876)
State	—		2		10
Foreign	—		(11)		(138)
Total deferred	—		(349)		(1,004)
Provision for income taxes	$	—	$	366	$	2,123

The provision for income taxes from continuing operations differs from the federal statutory rate of 21% due to the following for the years ended December 31 (in thousands, except for percentages) :

	2022				2021				2020
Statutory rate	23,413		21.0	%	20,908		21.0	%	22,629		21.0	%
State taxes, less federal effect	5,541		5.0	%	4,068		4.1	%	3,650		3.4	%
Federal tax credits	(549)		(0.5)	%	(587)		(0.6)	%	(1,064)		(1.0)	%
Excess tax benefit on stock based compensation	(214)		(0.2)	%	(2,039)		(2.0)	%	(1,674)		(1.6)	%
Executive compensation	960		0.9	%	1,781		1.8	%	1,114		1.0	%
Change in valuation allowance	—		—	%	—		—	%	(130)		(0.1)	%
Other	(67)		(0.1)	%	915		0.9	%	(57)		—	%
	$	29,084	26.1	%	$	25,046	25.2	%	$	24,468	22.7	%

Deferred tax liabilities at December 31 consisted of the following (in thousands):

	2022		2021
Depreciation	$	14,570	$	9,633
Goodwill	62,132		48,265
Intangible assets	3,706		1,657
Other	8,133		5,298
Gross deferred tax liabilities	88,541		64,853
Capital loss carryforward	(26,490)		(27,328)
Equity compensation	(5,993)		(8,236)
Assets held for sale	(13,669)		—
Capitalized research and development costs	(4,503)		—
Other	(17,493)		(15,641)
Gross deferred tax assets	(68,148)		(51,205)
Valuation allowances	26,488		26,581
Deferred tax assets, net of valuation allowances	(41,660)		(24,624)
Net deferred tax liabilities	$	46,881	$	40,229

At December 31, 2022, the Company had total net operating loss carry forwards of $7.9 million, which included $0.4 million for federal, $6.6 million for state, and $0.9 million for foreign income tax purposes. The federal and state net operating loss carry forwards expire between 2023 and 2042. The foreign net operating loss carry forwards expire between 2023 and 2031. The Company recognized a total of $0.7 million of deferred tax assets, net of the federal tax benefit, related to these net operating losses prior to any valuation allowances, which included $0.1 million of federal and $0.4 million of state deferred tax assets and $0.2 million of foreign deferred tax assets.

As a result of the sale of the Industrial business during 2021, the Company generated a capital loss of $113.7 million for federal and state purposes to the extent allowable under state tax regulations. Amended Federal returns were filed to carry back $3.7 million of capital loss. As of December 31, 2022, the remaining capital loss carry forward is $110.0 million. The capital loss carryforward will expire in 2026. The Company recognized a total of $26.5 million of deferred tax assets, net of the federal benefit, related to this carryforward prior to any valuation allowances, which included $22.2 million of federal and $4.3 million of state deferred tax assets. The Company has a full valuation allowance on the capital loss carry forward and as a result there is no deferred tax asset.

Deferred taxes include net deferred tax assets relating to certain state and foreign tax jurisdictions. A reduction of the carrying amount of deferred tax assets by a valuation allowance is required if it is more likely than not that such assets will not be realized. In 2020, the valuation allowance in China was reversed and a tax attribute valuation allowance was also reversed as the Company expects to utilize the attribute. In 2021, a valuation allowance was recorded on federal and state capital loss carry forwards which are not expected to be utilized before expiration.

The following sets forth a reconciliation of the beginning and ending amount of the Company’s valuation allowance (in thousands):

	2022		2021		2020
Balance as of January 1	$	26,581	$	111	$	298
Cost charged to the tax provision	10		13		70
Reductions	(103)		(41)		(248)
Reclassification from discontinued operations upon sale of industrial group	—		26,498		—
Currency translation	—		—		(9)
Balance as of December 31	$	26,488	$	26,581	$	111

The Company made net payments for income taxes for the following amounts for the years ended December 31 (in thousands):

	2022		2021		2020
Payments made for income taxes, net	$	27,017	$	22,076	$	21,351

At December 31, 2022, the Company had approximately $2.2 million of undistributed earnings of foreign subsidiaries. The Company continues to maintain its assertion that all remaining foreign earnings will be indefinitely reinvested. Any excess earnings could be used to grow the Company's foreign operations through launches of new capital projects or additional acquisitions. Determination of the amount of unrecognized deferred U.S. income tax liability related to the Company's remaining unremitted foreign earnings is not practicable due to the complexities associated with its hypothetical calculation.

In 2022, 2021 and 2020, the Company did not have any unrecognized tax benefits and no activity related to such benefits has occurred in any of the years presented in the consolidated financial statements. The Company classifies accrued interest and penalties related to unrecognized tax benefits in income tax expense. No interest or penalties have been recognized during the years ended December 31, 2022, 2021 or 2020.

The Company and its U.S. subsidiaries file a U.S. federal consolidated income tax return. Foreign and U.S. state jurisdictions have statute of limitations generally ranging from four to ten years. The Company is currently in appeals for an audit of tax years 2016 through 2019 in Massachusetts and believes the technical merits of the position will be sustained.