Income Taxes

12 Months Ended

Dec. 31, 2024

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,
	2024		2023		2022
United States	$	553,533	$	662,138	$	919,461
Foreign	13,421		25,998		65,411
Total	$	566,954	$	688,136	$	984,872

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

	Year Ended December 31,
	2024		2023		2022
Current:
Federal	$	97,251	$	120,122	$	164,135
State and other	19,846		34,603		57,459
Total current provision for income taxes	117,097		154,725		221,594
Deferred:
Federal	9,199		9,929		13,592
State and other	6,540		430		1,577
Total deferred provision for income taxes	15,739		10,359		15,169
Provision for income taxes	$	132,836	$	165,084	$	236,763

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,
	2024		2023		2022
Federal statutory rate	21.00	%	21.00	%	21.00	%
Change in valuation allowance	0.20		0.05		(0.02)
Stock-based compensation	(1.55)		(0.97)		(1.09)
Other, primarily state income tax rate	3.78		3.91		4.15
Total effective tax rate	23.43	%	23.99	%	24.04	%

In 2024, several countries in which we operate have adopted the Global Anti-Base Erosion Model Rules (Pillar Two), which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The Pillar Two directive did not have a material effect on our financial statements for the year ended December 31, 2024. We are continuing to evaluate the potential effect on future periods and will monitor additional guidance as it is released.

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 $8.8 million to our income tax provision in 2024, $6.7 million in 2023 and $10.8 million in 2022.

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

	December 31,
	2024		2023
Deferred tax assets:
Product inventories	$	13,625	$	11,764
Trade discounts on purchases	1,044		—
Accrued expenses	824		4,724
Leases	74,108		73,874
Share-based compensation	10,844		9,977
Uncertain tax positions	4,133		3,753
Net operating losses	2,336		1,447
Other	4,843		4,716
Total non-current	111,757		110,255
Less: Valuation allowance	(2,255)		(1,133)
Component reclassified for net presentation	(108,583)		(107,733)
Total non-current, net	919		1,389
Total deferred tax assets	919		1,389
Deferred tax liabilities:
Trade discounts on purchases	—		2,112
Prepaid expenses	9,380		6,610
Leases	73,583		73,092
Intangible assets, primarily goodwill	73,334		60,902
Depreciation	28,541		26,000
Interest rate swaps	5,153		6,438
Total non-current	189,991		175,154
Component reclassified for net presentation	(108,583)		(107,733)
Total non-current, net	81,408		67,421
Total deferred tax liabilities	81,408		67,421
Net deferred tax liability	$	80,489	$	66,032

At December 31, 2024, certain of our international subsidiaries had tax loss carryforwards totaling approximately $7.9 million, which expire in various years after 2025.  Deferred tax assets related to the tax loss carryforwards of these international subsidiaries were $2.3 million as of December 31, 2024 and $1.4 million as of December 31, 2023.  We have recorded a corresponding valuation allowance of $2.1 million and $1.0 million in the respective years.

As of December 31, 2024, 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):

	2024		2023		2022
Balance at beginning of year	$	17,871	$	15,489	$	13,297
Increases for tax positions taken during a prior period	—		—		275
Increases for tax positions taken during the current period	4,517		4,457		5,264
Decreases resulting from the expiration of the statute of limitations	2,709		2,075		3,347
Balance at end of year	$	19,679	$	17,871	$	15,489

The total amount of unrecognized tax benefits that, if recognized, would decrease the effective tax rate was $15.5 million at December 31, 2024 and $14.1 million at December 31, 2023.

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 $0.8 million in 2024 and $0.4 million in 2023 and interest income of $0.1 million in 2022.  Accrued interest related to unrecognized tax benefits was approximately $2.7 million at December 31, 2024 and $1.9 million at December 31, 2023.

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 2021.