Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

Income Taxes

For financial statement purposes, earnings before income taxes by source was comprised of the following:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Domestic	$	38,375	$	43,977	$	176,042
Foreign	14,492		17,494		18,262
Earnings before income taxes	$	52,867	$	61,471	$	194,304

A reconciliation of the federal statutory rate of 21% to the effective rate follows:

	Year Ended December 31,
	2023		2022		2021
Tax at statutory rate	21.0	%	21.0	%	21.0	%
Stock compensation	57.1	%	53.4	%	11.6	%
State income taxes	16.5	%	13.4	%	7.4	%
Effect of foreign operations	19.5	%	6.6	%	2.0	%
Effect of current year credits	(9.9)	%	(13.2)	%	(2.4)	%
Change in unrecognized tax benefits	(6.9)	%	0.1	%	(2.8)	%
Other permanent differences	1.7	%	0.9	%	0.3	%
Prior year return to provision adjustments	0.3	%	1.7	%	(0.2)	%
Valuation allowance	11.4	%	(3.0)	%	(7.1)	%
Other, net	(0.9)	%	(1.0)	%	0.8	%
Effective income tax rate	109.8	%	79.9	%	30.6	%

The components of income tax expense (benefit) are as follows:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Current expense (benefit)
Federal	$	58,480	$	62,878	$	(7,398)
State	9,644		21,473		15,106
Foreign	4,385		4,570		3,690
Total current	72,509		88,921		11,398
Deferred (benefit) expense
Federal	(28,084)		(25,923)		56,716
State	1,316		(13,321)		(1,205)
Foreign	12,305		(563)		(7,545)
Total deferred	(14,463)		(39,807)		47,966
Total income tax expense	$	58,046	$	49,114	$	59,364

Deferred tax assets (liabilities) consist of the following:

	December 31,
(in thousands)	2023		2022
Deferred tax assets
Net operating loss carryforwards	$	20,852	$	27,059
Accrued liabilities	64,410		55,527
Intangible assets	143,386		155,238
Lease obligations	79,645		81,412
Other assets	4,082		8,804
Foreign tax credit carryforwards	856		2,991
Total deferred tax assets	313,231		331,031
Valuation allowance	(9,340)		(3,158)
Deferred tax assets, net	303,891		327,873
Deferred tax liabilities
Rental merchandise	(212,137)		(236,381)
Property assets	(2,089)		(16,415)
Lease assets	(77,825)		(79,725)
Other liabilities	(650)		(452)
Total deferred tax liabilities	(292,701)		(332,973)
Net deferred taxes	$	11,190	$	(5,100)

As of each reporting date, our management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. At December 31, 2023, we had net operating loss carryforwards of approximately $163 million for state, none for federal and $41 million for foreign jurisdictions.

After review of the evidence generated during the year, we have determined that a valuation allowance is required against Mexico net operating losses due to the forecasted expiration of net operating losses. A valuation allowance is also required related to certain tax credits. State net operating losses were also partially offset by a valuation allowance. We also had federal, state and foreign tax credit carryforwards of approximately $3.9 million of which a portion has been offset by a valuation allowance. The net operating losses and credits will expire in various years between 2024 and 2042.

We file income tax returns in the U.S. and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, we are subject to examination by various taxing authorities. We are currently under examination by certain state revenue authorities for the fiscal years 2013 through 2020. The following is a summary of all tax years that are open to examination.

•U.S. Federal - 2020 and forward

•U.S. States - 2013 and forward

•Foreign - 2018 and forward

We do not anticipate that adjustments as a result of these audits, if any, will have a material impact to our Consolidated Statements of Operations, Consolidated Balance Sheets, and statement of cash flows or earnings per share.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

	Year Ended December 31,
(in thousands)	2023		2022		2021
Beginning unrecognized tax benefit balance	$	5,100	$	6,536	$	22,184
Additions based on tax positions related to current year	97		14		461
Reductions based on tax positions related to current year	—		(488)		—
Additions for tax positions of prior years	759		21		4,119
Reductions for tax positions of prior years	(4,735)		(983)		(3,006)
Settlements	—		—		(17,222)
Ending unrecognized tax benefit balance	$	1,221	$	5,100	$	6,536

Included in the balance of unrecognized tax benefits at December 31, 2023, is $0.9 million, net of federal benefit, which, if ultimately recognized, will affect our annual effective tax rate.

During the year ended December 31, 2023, we recorded interest expense of $3.1 million for remaining uncertain tax positions, partially offset by $1.0 million of interest income primarily related to the reversal of the accrual of interest for matters settled during the year in our favor, both of which are excluded from the reconciliation of unrecognized tax benefits presented above.