Income Taxes

12 Months Ended

Dec. 31, 2023

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,
	2023		2022		2021
United States	$	662,138	$	919,461	$	752,957
Foreign	25,998		65,411		71,188
Total	$	688,136	$	984,872	$	824,145

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

	Year Ended December 31,
	2023		2022		2021
Current:
Federal	$	120,122	$	164,135	$	124,379
State and other	34,603		57,459		44,783
Total current provision for income taxes	154,725		221,594		169,162
Deferred:
Federal	9,929		13,592		2,970
State and other	430		1,577		1,680
Total deferred provision for income taxes	10,359		15,169		4,650
Provision for income taxes	$	165,084	$	236,763	$	173,812

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,
	2023		2022		2021
Federal statutory rate	21.00	%	21.00	%	21.00	%
Change in valuation allowance	0.05		(0.02)		(0.11)
Stock-based compensation	(0.97)		(1.09)		(3.67)
Other, primarily state income tax rate	3.91		4.15		3.87
Total effective tax rate	23.99	%	24.04	%	21.09	%

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 $6.7 million to our income tax provision in 2023, $10.8 million in 2022 and $30.0 million in 2021.

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

	December 31,
	2023		2022
Deferred tax assets:
Product inventories	$	11,764	$	10,932
Accrued expenses	4,724		2,028
Leases	73,874		65,852
Share-based compensation	9,977		8,636
Uncertain tax positions	3,753		3,253
Net operating losses	1,447		987
Other	4,716		4,139
Total non-current	110,255		95,827
Less: Valuation allowance	(1,133)		(815)
Component reclassified for net presentation	(107,733)		(94,034)
Total non-current, net	1,389		978
Total deferred tax assets	1,389		978
Deferred tax liabilities:
Trade discounts on purchases	2,112		3,995
Prepaid expenses	6,610		4,903
Leases	73,092		64,549
Intangible assets, primarily goodwill	60,902		48,836
Depreciation	26,000		21,998
Interest rate swaps	6,438		8,512
Total non-current	175,154		152,793
Component reclassified for net presentation	(107,733)		(94,034)
Total non-current, net	67,421		58,759
Total deferred tax liabilities	67,421		58,759
Net deferred tax liability	$	66,032	$	57,781

At December 31, 2023, certain of our international subsidiaries had tax loss carryforwards totaling approximately $5.0 million, which expire in various years after 2024.  Deferred tax assets related to the tax loss carryforwards of these international subsidiaries were $1.4 million as of December 31, 2023 and $1.0 million as of December 31, 2022.  We have recorded a corresponding valuation allowance of $1.0 million and $0.7 million in the respective years.

As of December 31, 2023, 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):

	2023		2022		2021
Balance at beginning of year	$	15,489	$	13,297	$	15,553
Increases for tax positions taken during a prior period	—		275		—
Increases for tax positions taken during the current period	4,457		5,264		3,518
Decreases resulting from the expiration of the statute of limitations	2,075		3,347		3,185
Decreases relating to settlements	—		—		2,589
Balance at end of year	$	17,871	$	15,489	$	13,297

The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $14.1 million at December 31, 2023 and $12.2 million at December 31, 2022.

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 expense of $0.4 million in 2023 and interest income of $0.1 million in 2022 and $0.6 million in 2021.  Accrued interest related to unrecognized tax benefits was approximately $1.9 million at December 31, 2023 and $1.6 million at December 31, 2022.

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 2020.