Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

9. INCOME TAXES

The components of income before taxes and the provision for income taxes recorded in the consolidated statements of income are as follows:

	For the Years Ended December 31,
Components of Income before Taxes		2023		2022		2021
Domestic	$	591.9	$	573.6	$	327.6
Foreign		37.4		35.9		23.3
Income before taxes	$	629.3	$	609.5	$	350.9

	For the Years Ended December 31,
Components of Income Tax Provision		2023		2022		2021
Current expense:
U.S. Federal	$	109.7	$	119.5	$	77.3
State		29.1		28.8		18.2
Foreign		10.7		10.5		6.5
Total current expense	$	149.5	$	158.8	$	102.0
Deferred expense (benefit):
U.S. Federal	$	11.9	$	(2.1)	$	(10.9)
State		3.7		(0.6)		(3.2)
Foreign		(0.2)		(0.3)		—
Total deferred expense (benefit)	$	15.4	$	(3.0)	$	(14.1)
Total income tax provision	$	164.9	$	155.8	$	87.9

A reconciliation between the statutory U.S. federal income tax rate and the effective tax rate in the consolidated statements of income is as follows:

	For the Years Ended December 31,
	2023		2022		2021
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State and local income taxes, net of federal benefit	4.1		3.7		3.3
Other, net	1.1		0.9		0.7
Effective tax rate	26.2	%	25.6	%	25.0	%

We determine our deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of our assets and liabilities calculated using enacted applicable tax rates.  We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.  Changes in the valuation allowance, when recorded, are included in the provision for income taxes in the consolidated financial statements. The following deferred tax assets (liabilities) were recorded at December 31:

Assets (Liabilities)		2023		2022
Pension	$	23.5	$	28.9
Operating lease liabilities		58.8		47.2
Postretirement benefits		16.1		16.0
Inventory		25.2		20.1
Payroll accruals		6.1		5.4
Computer software		3.7		—
Bad debt reserves		2.0		2.2
Other deferred tax assets		19.0		19.6
Subtotal		154.4		139.4
Less: valuation allowances		(1.1)		(0.8)
Deferred tax assets		153.3		138.6
Fixed assets		(50.6)		(41.4)
Operating lease right-of-use assets		(54.1)		(43.2)
Computer software		—		(0.8)
Other deferred tax liabilities		(23.0)		(22.3)
Deferred tax liabilities		(127.7)		(107.7)
Net deferred tax assets	$	25.6	$	30.9

Deferred income taxes included in non-current assets (liabilities) at December 31 were:

		2023		2022
Deferred tax assets included in other non-current assets	$	28.1	$	33.6
Deferred tax liabilities included in other non-current liabilities		(2.5)		(2.7)
Total	$	25.6	$	30.9

Operating loss and tax credit carryforwards included in net deferred tax assets, all of which expire between 2025 and 2032, at December 31 were:

		2023		2022
U.S. Federal	$	1.1	$	0.8
State		0.1		0.2

We have placed valuation allowances of $1.1 million and $0.8 million for 2023 and 2022, respectively, relating to federal foreign tax credits that are not expected to be utilized prior to expiration.

As of December 31, 2023, we have no material undistributed earnings of non-U.S. subsidiaries due to the one-time transition tax and global intangible low-taxed income (“GILTI”) provisions enacted under the Tax Cuts and Jobs Act (“TCJA”). No additional income taxes have been provided for any outside basis differences inherent in these foreign entities, as these amounts continue to be

indefinitely reinvested in foreign operations. We have made an accounting policy election to treat GILTI as a period cost rather than accounting for it as part of deferred taxes. Due to the high-tax exception election made in 2022 and 2023, our GILTI period cost was immaterial in each year.

Our federal income tax returns for the tax years 2020 and forward are available for examination by the United States Internal Revenue Service (“IRS”).  The statute of limitations for the 2020 federal return will expire on October 15, 2024, unless extended by consent. Our state income tax returns for 2019 through 2023 remain subject to examination by various state authorities with the latest period closing on December 31, 2028.  We have not extended the statutes of limitations in any state jurisdictions with respect to years prior to 2019.

On August 16, 2022, President Biden signed H.R. 5376, the Inflation Reduction Act of 2022 (“IRA”). This legislation includes a 15% corporate alternative minimum tax among its key tax provisions effective for years beginning after December 31, 2022. We do not anticipate a material impact to the Company as historical earnings do not exceed applicable thresholds.

In 2021, the Organization for Economic Cooperation and Development (“OECD”) introduced a framework, referred to as Pillar Two, creating a 15% global minimum effective tax rate for large multinational corporations. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Company operates, effective beginning January 1, 2024. We have performed an analysis of potential exposure to Pillar Two income taxes based on the most recent information available regarding the financial performance of the constituent entities. Based on the initial assessment performed, the Pillar Two effective tax rates in all jurisdictions in which the Company operates are above 15% and management is not currently aware of any circumstances under which this might change. Therefore, we do not expect a material impact for Pillar Two top-up taxes as legislation becomes effective in 2024.

Our unrecognized tax benefits of $0.4 million, $0.5 million, and $1.0 million as of December 31, 2023, 2022, and 2021, respectively, are uncertain tax positions that would impact our effective tax rate if recognized.  We are periodically engaged in tax return examinations, reviews of statute of limitations periods, and settlements surrounding income taxes.  We do not anticipate a material change in unrecognized tax benefits during the next twelve months.

Our uncertain tax benefits, and changes thereto, during 2023, 2022, and 2021 were as follows:

		2023		2022		2021
Balance at January 1,	$	0.5	$	1.0	$	1.7
Reductions for tax positions of prior years		(0.1)		(0.5)		(0.7)
Balance at December 31,	$	0.4	$	0.5	$	1.0

We classify interest expense and penalties as part of our provision for income taxes based upon applicable federal and state interest/underpayment percentages.  We have accrued $0.1 million in interest and penalties at both December 31, 2023 and 2022. Interest was computed on the difference between the provision for income taxes recognized in accordance with GAAP and the amount of benefit previously taken or expected to be taken in our federal, state, and local income tax returns.