Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income taxes and equity in earnings is attributable to the following jurisdictions (in thousands):

	Year Ended December 31,
	2021		2020		2019
United States	$	752,957	$	428,857	$	304,259
Foreign	71,188		22,817		13,215
Total	$	824,145	$	451,674	$	317,474

The provision for income taxes consisted of the following (in thousands):

	Year Ended December 31,
	2021		2020		2019
Current:
Federal	$	124,379	$	67,093	$	35,270
State and other	44,783		20,680		17,168
Total current provision for income taxes	169,162		87,773		52,438
Deferred:
Federal	2,970		(1,298)		4,154
State and other	1,680		(1,244)		(431)
Total deferred provision for income taxes	4,650		(2,542)		3,723
Provision for income taxes	$	173,812	$	85,231	$	56,161

A reconciliation of the U.S. federal statutory tax rate to our effective tax rate on Income before income taxes and equity in earnings is as follows:

	Year Ended December 31,
	2021		2020		2019
Federal statutory rate	21.00	%	21.00	%	21.00	%
Change in valuation allowance	(0.11)		(0.22)		0.10
Stock-based compensation	(3.67)		(6.34)		(7.40)
Other, primarily state income tax rate	3.87		4.43		3.99
Total effective tax rate	21.09	%	18.87	%	17.69	%

We reduce federal and state income taxes payable by the tax benefits associated with the exercise of deductible nonqualified stock options and the lapse of restrictions on deductible restricted stock awards. To the extent realized tax deductions exceed the amount of previously recognized deferred tax benefits related to share-based compensation, we record an excess tax benefit. We record all excess tax benefits or deficiencies as income tax benefit or expense in the income statement. We recorded excess tax benefits of $30.0 million to our income tax provision in 2021, $28.6 million in 2020 and $23.5 million in 2019.

The table below presents the components of our deferred tax assets and liabilities (in thousands):

	December 31,
	2021		2020
Deferred tax assets:
Product inventories	$	8,597	$	6,110
Accrued expenses	3,105		4,101
Leases	59,457		50,301
Share-based compensation	8,981		8,730
Uncertain tax positions	2,792		3,266
Net operating losses	2,524		3,829
Interest rate swaps	—		3,023
Other	3,839		3,628
Total non-current	89,295		82,988
Less: Valuation allowance	(2,086)		(3,166)
Component reclassified for net presentation	(86,113)		(78,542)
Total non-current, net	1,096		1,280
Total deferred tax assets	1,096		1,280
Deferred tax liabilities:
Trade discounts on purchases	2,566		2,218
Prepaid expenses	4,226		3,379
Leases	58,146		49,004
Intangible assets, primarily goodwill	36,936		34,244
Depreciation	19,369		17,350
Interest rate swaps	710		—
Total non-current	121,953		106,195
Component reclassified for net presentation	(86,113)		(78,542)
Total non-current, net	35,840		27,653
Total deferred tax liabilities	35,840		27,653
Net deferred tax liability	$	34,744	$	26,373

At December 31, 2021, certain of our international subsidiaries had tax loss carryforwards totaling approximately $8.6 million, which expire in various years after 2022.  Deferred tax assets related to the tax loss carryforwards of these international subsidiaries were $2.5 million as of December 31, 2021 and $3.8 million as of December 31, 2020.  We have recorded a corresponding valuation allowance of $1.8 million and $2.9 million in the respective years.

As of December 31, 2021, United States income taxes were not provided on earnings or cash balances of our foreign subsidiaries, outside of the provisions of the transition tax from U.S. tax reform enacted in December 2017. As we have historically invested or expect to invest the undistributed earnings indefinitely to fund current cash flow needs in the countries where held, additional income tax provisions may be required. Determining the amount of unrecognized deferred tax liability on these undistributed earnings and cash balances is not practicable due to the complexity of tax laws and regulations and the varying circumstances, tax treatments and timing of any future repatriation.

The following table summarizes the activity related to uncertain tax positions for the past three years (in thousands):

	2021		2020		2019
Balance at beginning of year	$	15,553	$	13,582	$	12,179
Increases for tax positions taken during a prior period	—		1,363		771
Increases for tax positions taken during the current period	3,518		2,721		2,354
Decreases resulting from the expiration of the statute of limitations	3,185		2,113		1,390
Decreases relating to settlements	2,589		—		332
Balance at end of year	$	13,297	$	15,553	$	13,582

The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $10.5 million at December 31, 2021 and $12.3 million at December 31, 2020.

We record interest expense related to unrecognized tax benefits in Interest and other non-operating expenses, net, while we record related penalties in Selling and administrative expenses on our Consolidated Statements of Income.  For unrecognized tax benefits, we had interest income of $0.6 million in 2021 and interest expense of $1.0 million in 2020 and $0.6 million in 2019.  Accrued interest related to unrecognized tax benefits was approximately $1.6 million at December 31, 2021 and $2.7 million at December 31, 2020.

We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2018.