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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company’s effective tax rate for 2022, 2021 and 2020 was 21.2%, 23.3%, and 20.5%, respectively. The decrease from 2021 to 2022 is primarily due to an increase in certain tax credits and deductions and certain lower state taxes.

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, and on December 31, 2020, Congress passed an additional round of COVID relief legislation as part of the Bipartisan-Bicameral Omnibus COVID Relief Deal. The Company has reviewed the change in law and determined that it does not have a significant impact on the Company’s tax provision or financial statements. In addition, Balchem will continue to evaluate and analyze the impact of the U.S. Tax Cuts and Jobs Act that was enacted on December 22, 2017 and the additional guidance that has been issued, and may be issued, by the U.S. Department of Treasury, the SEC, and/or the Financial Accounting Standards Board ("FASB") regarding this act.
The Company considers the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company's specific plans for reinvestment of those subsidiary earnings. The Company projects that its foreign earnings will be utilized offshore for working capital and future foreign growth. The determination of the unrecognized deferred tax liability on those undistributed earnings is not practicable due to its legal entity structure and the complexity of U.S. and local country tax laws. If the Company decides to repatriate the undistributed foreign earnings, it will need to recognize the income tax effects in the period it changes its assertion on indefinite reinvestment.
Income tax expense consists of the following:
 202220212020
Current:   
Federal$26,423 $25,019 $19,249 
Foreign7,103 7,553 3,399 
State3,964 3,664 3,590 
Deferred:
Federal(7,532)(3,709)(3,017)
Foreign(215)(3,038)167 
State(1,361)(360)(1,594)
Total income tax provision$28,382 $29,129 $21,794 
The provision for income taxes differs from the amount computed by applying the Federal statutory rate of 21% for 2022, 2021, and 2020 to earnings before income tax expense due to the following:
 202220212020
Income tax at Federal statutory rate$28,087 $26,299 $22,348 
State income taxes, net of Federal income taxes1,862 2,406 2,288 
Stock Options(676)(924)(1,529)
FDII(1,778)(1,540)(1,400)
Foreign rate differential2,066 1,188 413 
Other(1,179)1,700 (326)
Total income tax provision$28,382 $29,129 $21,794 
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax (liabilities) at December 31, 2022 and 2021 were as follows:
 20222021
Deferred tax assets:  
Inventories$1,038 $495 
Restricted stock and stock options3,932 4,082 
Lease liabilities5,439 1,807 
Foreign currency and interest rate swaps— 649 
Research and development4,134 — 
Other3,717 3,657 
Total deferred tax assets18,260 10,690 
Deferred tax (liabilities):
Amortization$(46,688)$(28,133)
Depreciation(25,097)(25,484)
Prepaid expenses(462)(733)
Foreign currency and interest rate swaps(1,456)— 
Right of use assets(5,324)(1,769)
Other(1,995)(1,026)
Total deferred tax (liabilities)(81,022)(57,145)
Valuation allowance(22)— 
Net deferred tax (liability)$(62,784)$(46,455)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will not realize the benefits of these deductible differences. The amount of deferred tax asset realizable, however, could change if management’s estimate of future taxable income should change.

As of December 31, 2022, the Company has state income tax net operating loss (NOL) carryforwards of $366. The state NOL carryforwards will expire between 2026 and 2035. The Company believes that the benefit from the state NOL carryforwards will not be realized, therefore a valuation allowance has been established in the amount of $22. The Company also acquired an insignificant amount of NOL carryforwards with the acquisition of Chemogas Holding NV, a privately held specialty gases company headquartered in Grimbergen, Belgium ("Chemogas").
Provisions of ASC 740-10 clarify whether or not to recognize assets or liabilities for tax positions taken that may be challenged by a tax authority. A reconciliation of the beginning and ending amount of unrecognized tax benefits, which is included in other long-term obligations on the Company’s consolidated balance sheets, is as follows:
 202220212020
Balance at beginning of period$5,881 $5,335 $4,762 
Increases for tax positions of prior years2,194 806 267 
Decreases for tax positions of prior years(2,260)(260)(391)
Increases for tax positions related to current year— — 697 
Balance at end of period$5,815 $5,881 $5,335 
All of Balchem's unrecognized tax benefits, if recognized in future periods, would impact the Company's effective tax rate in such future periods.
The Company recognizes both interest and penalties as part of the income tax provision. During the year ended December 31, 2022, these amounts were reduced by $371. During the years ended December 31, 2021 and 2020, total interest and penalties amounted to approximately $262 and $232, respectively. As of December 31, 2022 and 2021, accrued interest and penalties were $1,735 and $2,106, respectively.
Balchem files income tax returns in the U.S. and in various states and foreign countries. In the major jurisdictions where the Company operates, it is generally no longer subject to income tax examinations by tax authorities for years before 2018 and management does not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.