Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

16. INCOME TAXES

Income tax provision (benefit) consists of the following (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current income tax provision:
Federal	$	52,634	$	28,830	$	30,450
State		13,996		9,126		15,192
		66,600		37,956		45,642
Deferred income tax provision:
Federal		2,869		20,000		21,607
State		1,346		4,256		(595	)
		4,215		24,256		21,012
Total income tax provision	$	70,815	$	62,212	$	66,654

The Company’s effective tax rate for the year ended December 31, 2023, was 25.6% and was comparable to the effective tax rate for the year ended December 31, 2022, of 25.2%, which resulted in income tax expense of $70.8 million and $62.2 million, respectively.

The income tax provision differs from the amount of income tax determined by applying the U.S. Federal statutory rate to income before taxes as a result of the following (in thousands):

	Year Ended December 31,
	2023			2022			2021
U.S. Federal statutory taxes	$	58,002		$	51,836		$	57,832
State and local taxes, net of U.S. Federal benefit		12,296			10,608			12,174
Permanent items		1,320			(208	)		1,208
Excess tax benefits from vesting or settlement of stock compensation awards		(656	)		(11	)		(2,868	)
Federal credits		(755	)		(598	)		(686	)
Other		608			585			(1,006	)
Total income tax provision	$	70,815		$	62,212		$	66,654

Deferred tax assets and liabilities consist of the following (in thousands):

	As of December 31,
	2023			2022
Deferred tax assets:
Operating lease liability		6,886			7,941
Product and surface flaking warranty reserves		5,645			6,469
State tax credit carryforwards		4,250			4,084
Deferred revenue		4,215			2,921
Tax Cut and Jobs Act capitalization of research and development costs		3,956			2,152
Stock-based compensation		2,361			1,146
Inventories		639			2,965
Accruals not currently deductible and other		—			373
Net Operating Losses		—			132
Gross deferred tax assets, before valuation allowance		27,952			28,183
Valuation allowance		(3,307	)		(3,026	)
Gross deferred tax assets, after valuation allowance		24,645			25,157
Deferred tax liabilities:
Depreciation		(74,794	)		(74,604	)
Inventories		(10,627	)		(6,749	)
Operating lease right-of-use asset		(6,677	)		(7,687	)
Goodwill amortization		(3,536	)		(2,879	)
Other		(1,450	)		(1,462	)
Gross deferred tax liabilities		(97,084	)		(93,381	)
Net deferred tax liability	$	(72,439	)	$	(68,224	)

The Company recognizes deferred tax assets and liabilities based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax laws and statutory tax rates. In accordance with accounting standards, the Company assesses the likelihood that its deferred tax assets will be realized. Deferred tax assets are reduced by a valuation allowance when, after considering all available positive and negative evidence, it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized, primarily certain state income tax credits. As of December 31, 2023, the Company had a valuation allowance of $3.3 million against deferred tax assets it estimates will not be realized. The Company will analyze its position in subsequent reporting periods, considering all available positive and negative evidence, in determining the expected realization of its deferred tax assets.

The Company recognizes interest and penalties related to tax matters as a component of “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income. As of December 31, 2023, the Company has identified no uncertain tax position and, accordingly, has not recorded any unrecognized tax benefits or associated interest and penalties.

The Company operates in multiple tax jurisdictions and, in the normal course of business, its tax returns are subject to examination by various taxing authorities. Such examinations may result in future assessments by these taxing authorities, and the Company has accrued a liability when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with accounting standards. As of December 31, 2023, for certain tax jurisdictions, tax years 2019 through 2023 remain subject to examination. The Company believes that adequate provisions have been made for all tax returns subject to examination. Sales made to foreign distributors are not taxable in any foreign jurisdictions as the Company does not have a taxable presence.