Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 4. Income Taxes

Components of earnings before income taxes and noncontrolling interests for the years ended December 31 are as follows (in thousands):

	2023		2022		2021
United States	$	3,198,048	$	4,996,762	$	4,179,064
Foreign		20,895		24,307		30,006
Total income before income taxes	$	3,218,943	$	5,021,069	$	4,209,070

The company files a consolidated federal income tax return. The provision for income tax expense for the years ended December 31 is as follows (in thousands):

	2023		2022		2021
Current income tax expense
Federal	$	600,499	$	946,016	$	517,272
State		91,965		152,758		116,448
Foreign		3,482		8,605		9,919
Total current		695,946		1,107,379		643,639
Deferred income tax expense
Federal		38,172		22,168		304,235
State		15,355		13,333		16,226
Foreign		2,138		(1,303)		(1,844)
Total deferred		55,665		34,198		318,617
Total income tax expense	$	751,611	$	1,141,577	$	962,256

A reconciliation of the statutory rates to the actual effective tax rates for the years ended December 31 are as follows:

	2023			2022			2021
Statutory federal tax rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal benefit		2.6			2.6			2.5
Federal research & development credits		(0.2)			(0.6)			(0.7)
Other permanent differences		(0.1)			(0.3)			0.1
Effective tax rate		23.3	%		22.7	%		22.9	%

Note 4. Income Taxes (Continued)

Significant components of the company’s deferred tax assets and liabilities at December 31 are as follows (in thousands):

	2023		2022
Deferred tax assets
Accrued expenses and allowances	$	41,894	$	34,052
Inventories		10,685		8,028
Net operating loss carryforwards		7,663		16,412
Amortizable assets		5,798		-
Other		9,149		8,091
		75,189		66,583
Less: valuation allowance		(816)		(805)
Total net deferred tax assets		74,373		65,778
Deferred tax liabilities
Property, plant and equipment		(1,013,045)		(951,404)
Amortizable assets		-		(1,304)
Other		(6,096)		(2,173)
Total deferred tax liabilities		(1,019,141)		(954,881)
Net deferred tax liability	$	(944,768)	$	(889,103)

Certain wholly-owned and controlled subsidiaries of the company file separate federal and state income tax returns. One of the controlled subsidiaries generated federal net operating loss carryforwards in the years 2018 and prior, which total $11.5 million at December 31, 2023, and which expire in the years 2037 through 2039, along with state net operating loss carryforwards which expire in the years 2034 through 2039. Annually, the company evaluates the realizability of the net deferred tax assets for this controlled subsidiary. In completing this evaluation, the company considers all available positive and negative evidence in order to determine whether, based on the weight of the evidence, a valuation allowance for its deferred tax assets was necessary. Such evidence includes current operating results, historical results, future reversals of existing taxable temporary differences and expectations for future taxable income (exclusive of the reversal of temporary differences and carryforwards), as well as the implementation of feasible and prudent tax planning strategies. Based on the positive evidence, the company concluded that it was more likely than not that the net deferred tax assets would be realized and a valuation allowance was not necessary. The company continues to maintain a valuation allowance of $816,000 and $805,000 as of December 31, 2023, and 2022, respectively, with respect to certain state tax credits of the controlled subsidiary.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2023		2022		2021
Balance at January 1	$	28,646	$	20,466	$	12,830
Increases related to current year tax positions		1,500		9,600		8,250
Increases related to prior year tax positions		1,798		364		2,095
Decreases related to prior year tax positions		(686)		(1,784)		(2,709)
Balance at December 31	$	31,258	$	28,646	$	20,466

Note 4. Income Taxes (Continued)

Included in the balance of unrecognized tax benefits at December 31, 2023 and 2022, are potential benefits of $27.8 million and $25.1 million, respectively, that, if recognized, would affect the effective tax rate. The company recognizes interest and penalties related to its tax contingencies on a net-of-tax basis in income tax expense. During the years ended December 31, 2023 and 2022, the company recognized expense from the increase of interest expense and penalties of $1,560,000 and $480,000, respectively, net of tax and during the year ended December 31, 2021, the company recognized a benefit from the decrease of interest expense and penalties of $205,000, net of tax. In addition to the unrecognized tax benefits in the table above, the company had $3.2 million and $1.2 million accrued for the payment of interest and penalties at December 31, 2023 and 2022, respectively.

It is reasonably possible that the amount of unrecognized tax benefits could change in the next twelve months in an amount ranging from zero to $10.0 million, as a result of the expiration of the statute of limitations and other federal and state income tax audits. The company files income tax returns in the U.S. federal jurisdiction as well as income tax returns in various state jurisdictions. The tax years 2020 through 2022 remain open to examination by the Internal Revenue Service and various state and local jurisdictions.