Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before the provision for income taxes is attributable to the following jurisdictions for years ended December 31 (in thousands):

	2023		2022		2021
United States	$	322,856	$	506,214	$	515,041
Foreign	1,002,149		769,446		593,767
Total	$	1,325,005	$	1,275,660	$	1,108,808

The provision (benefit) for income taxes for the years ended December 31 consists of the following (in thousands):

 

	2023		2022		2021
Current:
Federal	$	155,647	$	166,172	$	118,861
State	25,614		34,947		31,674
Foreign	208,532		153,388		107,751
Total current	389,793		354,507		258,286
Deferred:
Federal	(46,676)		(36,613)		(12,165)
State	(8,088)		(6,066)		(4,540)
Foreign	8,086		9,505		27,730
Total deferred	(46,678)		(33,174)		11,025
Total provision	$	343,115	$	321,333	$	269,311

The provision for income taxes differs from amounts computed by applying the U.S. federal tax rate of 21% for 2023, 2022, and 2021, respectively, to income before income taxes for the years ended December 31, 2023, 2022, and 2021 due to the following (in thousands):

 

	2023				2022				2021
Computed “expected” tax expense	$	278,251	21.0	%	$	267,889	21.0	%	$	232,850	21.0	%
Changes resulting from:
Change in valuation allowance	22,447		1.7		22,399		1.8		1,378		0.1
Foreign income tax differential	14,949		1.1		566		—		(10,326)		(0.9)
State taxes net of federal benefits	13,857		1.0		12,745		1.0		18,352		1.7
Increase in tax expense due to uncertain tax positions	14,146		1.1		8,257		0.6		8,185		0.7
Foreign withholding tax	24,331		1.8		13,547		1.1		9,143		0.8
Change in indefinite reinvestment - Russia	—		—		(9,049)		(0.7)		—		—
Stock-based compensation	3,960		0.3		(10,000)		(0.8)		(16,304)		(1.5)
Sub-part F Income/GILTI	94,594		7.1		79,420		6.2		72,449		6.5
Foreign tax credits	(98,641)		(7.4)		(73,974)		(5.8)		(63,926)		(5.8)
Foreign source non-deductible interest	9,530		0.7		9,462		0.7		10,348		0.9
IRC section 162(m) adjustment	4,019		0.3		8,119		0.6		3,665		0.3
Brazil tourism tax benefit	(16,311)		(1.2)		(13,810)		(1.1)		—		—
Interest on net equity deduction	(15,051)		(1.1)		—		—		—		—
Other	(6,966)		(0.5)		5,762		0.5		3,497		0.3
Provision for income taxes	$	343,115	25.9	%	$	321,333	25.2	%	$	269,311	24.3	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31 are as follows (in thousands):

	2023		2022
Deferred tax assets:
Accounts receivable, principally due to the allowance for credit losses	$	20,110	$	19,508
Accrued expenses not currently deductible for tax	12,922		7,307
Lease deferral	15,767		18,146
Interest rate swap	11,994		—
Stock-based compensation	47,537		41,202
Income tax credits	84,505		62,512
Net operating loss carry forwards	134,911		81,580
Accrued escheat	3,456		3,286
Other	55,466		28,773
Deferred tax assets before valuation allowance	386,668		262,314
Valuation allowance	(165,982)		(117,379)
Deferred tax assets, net	220,686		144,935
Deferred tax liabilities:
Intangibles—including goodwill	(536,561)		(504,590)
Basis difference in investment in subsidiaries	(43,821)		(42,091)
Interest rate swap	—		(2,964)
Lease deferral	(13,589)		(15,428)
Accrued expense liability	(718)		(742)
Prepaid expenses	(1,805)		(1,713)
Withholding taxes	(26,407)		(31,448)
Property and equipment and other	(66,617)		(72,076)
Deferred tax liabilities	(689,518)		(671,052)
Net deferred tax liabilities	$	(468,832)	$	(526,117)

The Company’s deferred tax balances are classified in its balance sheets as of December 31 as follows (in thousands):

 

	2023		2022
Long term deferred tax assets and liabilities:
Long term deferred tax assets	$	1,400	$	1,348
Long term deferred tax liabilities	(470,232)		(527,465)
Net deferred tax liabilities	$	(468,832)	$	(526,117)

The valuation allowances relate to income tax credits, foreign net operating loss carryforwards, state net operating loss carryforwards and state 163(j) limitation on business interest carryforward. The net change in the total valuation allowance for the year ended December 31, 2023 was an increase of $48.6 million. The valuation allowance increase was primarily due to an increase in acquired foreign net operating losses where significant negative evidence on future utilization was considered.

As of December 31, 2023, the Company had a net operating loss carryforward for state income tax purposes of approximately $54.0 million that is available to offset future state tax expense, either indefinitely or in some cases subject to expiration in 15 or 20 years. Additionally, the Company had $80.9 million net operating loss carryforwards for foreign income tax purposes that are available to offset future foreign tax expense. Most foreign net operating loss carryforwards will not expire in future years. The Company has provided a valuation allowance against $71.3 million of its deferred tax asset related to the net operating losses as it does not anticipate utilizing the losses in the foreseeable future.

In addition, the Company has foreign tax credits for foreign income purposes in the amount of $84.5 million. The Company has provided a valuation allowance against $84.5 million of the tax credits as it does not anticipate utilizing the credits in the foreseeable future.

During 2023 and 2022, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits of $8.1 million and $4.4 million, respectively. Accumulated interest and penalties were $30.7 million and $22.7 million on the Consolidated Balance Sheets at December 31, 2023 and 2022, respectively. In accordance with the Company's accounting policy, interest and penalties related to unrecognized tax benefits are included as a component of income tax expense.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2023, 2022, and 2021 is as follows (in thousands):

Unrecognized tax benefits at December 31, 2020	$	35,749
Additions based on tax positions related to the current year	8,543
Additions based on tax positions related to the prior year	5,909
Deductions based on settlement of prior year tax positions	(2,122)
Deductions based on expiration of prior year tax positions	(1,058)
Unrecognized tax benefits at December 31, 2021	47,021
Additions based on tax positions related to the current year	7,752
Additions based on tax positions related to the prior year	200
Deductions based on settlement of prior year tax positions	(1,550)
Addition for cumulative federal benefit of state tax deductions	7,281
Change due to OCI	(35)
Unrecognized tax benefits at December 31, 2022	60,669
Additions and deductions based on tax positions related to the current year	8,821
Additions and deductions based on tax positions related to the prior year	(1,913)
Deductions based on settlements of prior year tax positions	(104)
Deductions based on expiration of prior year tax positions	(4,235)
Change due to OCI	(132)
Unrecognized tax benefits at December 31, 2023	$	63,106

In prior years, the Company included federal benefits of state tax deductions related to unrecognized tax benefits in its tabular reconciliation above. A cumulative adjustment was made in 2022 to remove these amounts from the above tabular disclosure.

As of December 31, 2023, the Company had total unrecognized tax benefits of $63.1 million all of which, if recognized, would affect its effective tax rate. It is not anticipated that there are any unrecognized tax benefits that will significantly increase or decrease within the next twelve months.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2015. The statute of limitations for most state income tax returns has expired for years prior to 2020. The statute of limitations has expired for years prior to 2018 for the Company’s Mexican income tax returns, and 2018 for the Company’s Luxembourg income tax returns.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) enacted model rules for a new global minimum tax framework (“BEPS Pillar Two”), which generally provide for a minimum effective tax rate of 15%. Various governments around the world have enacted, or are in the process of enacting, legislation on this, with certain enactments becoming effective for tax years beginning in January 2024. While we do not anticipate that these rules will have a material effect on our tax provision or effective tax rate, we continue to monitor evolving tax legislation in the jurisdictions in which we operate as such legislation becomes effective.