Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

19. Income Taxes

We and our principal domestic subsidiaries are included in a consolidated U.S. federal income tax return. Our international subsidiaries file various income tax returns in their jurisdictions. Significant components of earnings before income taxes and the provision for income taxes are as follows (in millions):

	Year Ended December 31,
	2023			2022			2021
Earnings before income taxes:
United States	$	605.0		$	781.6		$	593.0
Foreign, principally Australia, Canada, New Zealand    and the U.K.		580.1			545.4			382.1
Total earnings before income taxes	$	1,185.1		$	1,327.0		$	975.1
Provision for income taxes:
Federal:
Current	$	(21.4	)	$	109.1		$	44.6
Deferred		112.9			(3.5	)		(151.6	)
		91.5			105.6			(107.0	)
State and local:
Current		(15.4	)		114.3			50.6
Deferred		43.0			(83.5	)		(11.6	)
		27.6			30.8			39.0
Foreign:
Current		212.8			196.6			108.8
Deferred		(112.8	)		(122.0	)		(20.7	)
		100.0			74.6			88.1
Total provision for income taxes	$	219.1		$	211.0		$	20.1

A reconciliation of the provision for income taxes with the U.S. federal statutory income tax rate is as follows (in millions, except percentages):

	Year Ended December 31,
	2023						2022						2021
	Amount			% of Pretax Earnings			Amount			% of Pretax Earnings			Amount			% of Pretax Earnings
Federal statutory rate	$	248.9			21.0		$	278.7			21.0		$	204.8			21.0
State income taxes - net of    federal benefit		49.7			4.2			32.9			2.5			30.7			3.2
Differences related to non U.S. operations		(20.6	)		(1.7	)		(31.9	)		(2.4	)		(8.7	)		(0.9	)
Alternative energy and other    tax credits		(7.9	)		(0.7	)		(6.9	)		(0.5	)		(199.0	)		(20.4	)
Other permanent differences		27.6			2.3			22.5			1.7			(3.5	)		(0.4	)
Stock-based compensation		(76.1	)		(6.4	)		(59.3	)		(4.5	)		(40.0	)		(4.1	)
Changes in unrecognized tax benefits		11.9			1.0			4.0			0.3			0.8			0.1
Change in valuation allowance		3.9			0.3			15.5			1.2			26.4			2.7
Change in tax rates		(18.3	)		(1.5	)		(44.5	)		(3.4	)		8.6			0.9
Provision for income taxes	$	219.1		$	18.5		$	211.0		$	15.9		$	20.1		$	2.1

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in millions):

	December 31,
	2023			2022
Gross unrecognized tax benefits at January 1	$	13.4		$	11.7
Increases in tax positions for current year		14.6			3.8
Settlements		(2.9	)		(1.7	)
Lapse in statute of limitations		(3.4	)		(1.4	)
Increases in tax positions for prior years		3.6			3.1
Decreases in tax positions for prior years		—			(2.1	)
Gross unrecognized tax benefits at December 31	$	25.3		$	13.4

The total amount of net unrecognized tax benefits that, if recognized, would affect the effective tax rate was $24.5 million and $12.3 million at December 31, 2023 and 2022, respectively. We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes. At December 31, 2023 and 2022, we had accrued interest and penalties related to unrecognized tax benefits of $2.8 million and $3.4 million, respectively.

We file income tax returns in the U.S. and in various state, local and foreign jurisdictions. We are routinely examined by tax authorities in these jurisdictions. At December 31, 2023, our corporate returns had been examined by the IRS or the statute had lapsed through calendar year 2019. In addition, from 2019 forward, various state and foreign jurisdictions remain open. It is reasonably possible that our gross unrecognized tax benefits may change within the next twelve months. However, we believe any changes in the recorded balance would not have a significant impact on our consolidated financial statements.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in millions):

	December 31,
	2023			2022
Deferred tax assets:
Alternative minimum tax and other credit carryforwards	$	867.3		$	772.7
Accrued and unfunded compensation and employee benefits		364.4			321.8
Amortizable intangible assets		122.9			69.3
Compensation expense related to stock options		18.3			11.1
Accrued liabilities		129.9			126.6
Accrued pension liability		—			3.1
Investments		1.2			2.6
Net operating loss carryforwards		172.7			129.4
Capital loss carryforwards		8.5			8.1
Other tax attributes		34.7			—
Depreciable fixed assets		13.2			—
Lease liabilities		103.4			96.5
Capitalized indirect property costs		0.2			394.1
Revenue recognition		42.1			—
Other		10.1			4.3
Total deferred tax assets		1,888.9			1,939.6
Valuation allowance for deferred tax assets		(195.8	)		(135.2	)
Deferred tax assets		1,693.1			1,804.4
Deferred tax liabilities:
Nondeductible amortizable intangible assets		531.7			433.9
Accrued pension liability		1.7			—
Investment-related partnerships		6.5			6.6
Depreciable fixed assets		—			46.5
Right-of-use assets		95.0			88.6
Hedging instruments		38.2			10.7
Other prepaid items		17.4			11.8
Total deferred tax liabilities		690.5			598.1
Net deferred tax assets	$	1,002.6		$	1,206.3

At December 31, 2023 and 2022, $129.6 million and $92.4 million, respectively, have been included in noncurrent liabilities in the accompanying consolidated balance sheet. General business and other tax credits of $839.8 million begin to expire, if not utilized, in 2032 and state credits, net of federal benefit, of $27.5 million expire, if not used, by 2028. Net operating loss carryforwards of $172.7 million, related to federal, state and foreign begin to expire, if not utilized in 2024. We expect the historically favorable trend in earnings before income taxes to continue in the foreseeable future. Valuation allowances have been established for certain foreign intangible assets (including nondeductible amortization and earnout payable expenses) and various state net operating loss carryforwards that may not be utilized in the future.

There are undistributed earnings of $632.3 million and $835.1 million at December 31, 2023 and 2022, respectively, of foreign subsidiaries which are considered permanently invested outside of the U.S. The amount of unrecognized deferred tax liability on these undistributed earnings was not material at December 31, 2023 and 2022. There are only select jurisdictions for which the company regards the undistributed earnings as no longer permanently reinvested. We have recognized the deferred tax liability associated with these undistributed earnings during 2023, however, such liability was also not material.

Current U.S. tax law requires U.S. shareholders to include in income certain “global intangible low-taxed income” (which we refer to as GILTI) beginning in 2018. Our policy is to include the GILTI income in the future period when the tax arises and we recorded income tax expense on such income in 2023, 2022 and 2021. Current U.S. tax law includes the U.S. Base Erosion and Anti-Abuse Tax (which we refer to as BEAT) beginning in 2018. Based on our analysis, we determined that our base erosion payments do not exceed the threshold for applicability for the years in 2023, 2022 and 2021, and we do not currently anticipate any significant long-term impact from the BEAT in our provision for income taxes in future periods.