Income Tax

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

The components of income tax expense for the three months ended March 31, 2024 and 2023, respectively, consisted of the following:

	Three months ended March 31,
(In thousands)	2024		2023
Current tax provision	$	6,012	$	5,026
Deferred tax benefit	(5,720)		(2,208)
Income tax (benefit) expense	$	292	$	2,818

The Company conducts operations in Puerto Rico, the United States, and certain countries in Latin America. As a result, the income tax expense includes the effect of taxes paid to the government of Puerto Rico as well as foreign jurisdictions. The following table presents the components of income tax expense for the three months ended March 31, 2024 and 2023, and its segregation based on location of operations:

	Three months ended March 31,
(In thousands)	2024		2023
Current tax provision
Puerto Rico	$	606	$	1,180
United States	90		11
Foreign countries	5,316		3,835
Total current tax provision	$	6,012	$	5,026
Deferred tax benefit
Puerto Rico	$	(3,659)	$	(235)
United States	(9)		(26)
Foreign countries	(2,052)		(1,947)
Total deferred tax benefit	$	(5,720)	$	(2,208)

Taxes payable to foreign countries by EVERTEC’s subsidiaries is paid by such subsidiary and the corresponding liability and expense will be presented in EVERTEC’s consolidated financial statements.

As of March 31, 2024, the Company had $139.8 million of unremitted earnings from foreign subsidiaries, compared to $137.0 million as of December 31, 2023. The Company has not recognized a deferred tax liability on undistributed earnings for the Company’s foreign subsidiaries because these earnings are intended to be indefinitely reinvested.

As of March 31, 2024, the gross deferred tax asset amounted to $71.1 million and the gross deferred tax liability amounted to $100.1 million, compared to $65.4 million and $100.9 million, respectively, as of December 31, 2023. As of March 31, 2024, and December 31, 2023, there is a valuation allowance against the gross deferred tax asset of approximately $4.7 million and $4.6 million, respectively.

The Company estimates that it is reasonably possible that the liability for uncertain tax position created from acquisitions in foreign jurisdictions will decrease by approximately $2.6 million in the next 12 months as a result of the expiration of the statute of limitations.

Income tax expense differs from the amount computed by applying the Puerto Rico statutory income tax rate to the income before income taxes as a result of the following:

	Three months ended March 31,
(In thousands)	2024		2023
Computed income tax at statutory rates	$	6,260	$	12,330
Differences in tax rates due to multiple jurisdictions	1,419		1,029
Effect of income subject to tax-exemption grant	(8,252)		(8,849)
Unrecognized tax expense	142		34
Excess tax benefits on share-based compensation	(526)		(91)
Tax credits for research and development activities	—		(884)
Other, net	1,249		(751)
Income tax expense	$	292	$	2,818