Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

Note 8: Income Taxes

The following table lists the components of the provision (benefit) for income taxes:

Years ended December 31,	2022		2021		2020
(in thousands)
Current provision (benefit):
Federal	$	47,744	$	4,946	$	(74,841)
State		3,164		(1,387)		2,200
Foreign		865		784		1,247
Deferred provision (benefit):
Federal		14,026		2,287		(16,376)
State		5,470		2,601		(9,469)
Total income tax provision (benefit)	$	71,269	$	9,231	$	(97,239)

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted in 2020, which among other changes, eliminated the taxable income limit for certain net operating losses (“NOL”). This allowed businesses to carryback NOLs arising in 2018, 2019 and 2020 to the five prior years, and provided a payment delay of employer payroll taxes during 2020 after the date of enactment. These provisions enabled a carryback of federal tax losses related to 2019 and 2020. The Company recorded net tax benefits totaling $29 million in 2020 related to these provisions.

Reconciliation between the federal statutory rate and RPC’s effective tax rate is as follows:

Years ended December 31,	2022		2021		2020
Federal statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	1.9		2.9		1.5
Foreign taxes, net of federal benefit	0.3		5.1		(0.4)
Tax credits	(0.1)		(3.5)		0.1
Change in contingencies	—		8.6		—
Non-deductible expenses	0.7		(2.8)		(0.1)
Adjustments related to CARES Act	—		3.2		8.5
Change in estimated deferred rate	0.4		10.2		—
Adjustments related to vesting of restricted stock	0.2		7.1		(0.8)
Other	0.2		4.3		1.6
Effective tax rate	24.6	%	56.1	%	31.4	%

Significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31,	2022		2021
(in thousands)
Deferred tax assets:
Self-insurance	$	3,051	$	5,673
Pension		5,237		7,982
State net operating loss carryforwards		1,960		5,558
Allowance for credit losses		1,757		1,692
Stock-based compensation		2,531		2,532
Inventory reserve		3,290		2,868
Lease liability		6,701		5,620
Valuation allowance		(990)		(865)
All others, net		3,427		2,834
Gross deferred tax assets		26,964		33,894
Deferred tax liabilities:
Depreciation		(51,494)		(39,253)
Right of use asset		(6,397)		(5,834)
Goodwill amortization		(6,546)		(6,556)
Gross deferred tax liabilities		(64,437)		(51,643)
Net deferred tax liabilities	$	(37,473)	$	(17,749)

The Company's current intention is to permanently reinvest funds held in our foreign subsidiaries outside of the U.S., with the possible exception of repatriation of funds that have been previously subject to U.S. federal and state taxation or when it would be tax effective through the utilization of foreign tax credits, or would otherwise create no additional U.S. tax cost.

Total net income tax payments (refunds) were $35.8 million in 2022, $(20.9) million in 2021, and $(10.1) million in 2020. As of December 31, 2022, the Company has net operating loss carryforwards recorded related to state income taxes of $36.9 million (gross) that will expire between 2023 and 2042.

The Company’s policy is to record interest and penalties related to income tax matters as income tax expense. Accrued interest and penalties were immaterial as of December 31, 2022 and 2021.

During 2022, the Company recognized an increase in its liability for unrecognized tax benefits related primarily to current year positions and disclosed as part of other long-term liabilities on the consolidated balance sheet. This liability, if released, would affect our effective rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2022		2021
(in thousands)
Balance at January 1	$	1,737	$	—
Additions (reductions) based on tax positions related to the current year		197		1,737
Additions (reductions) for tax positions of prior years		(17)		—
Balance at December 31	$	1,917	$	1,737

It is reasonably possible that the amount of the unrecognized benefits with respect to the Company’s unrecognized tax positions will increase or decrease in the next 12 months. These changes may be the result of, among other things, expiration of statute of limitation, or conclusions of examinations or reviews. However, quantification of an estimated range cannot be made at this time.

The Company and its subsidiaries are subject to U.S. federal and state income tax in multiple jurisdictions. In many cases, the uncertain tax positions are related to tax years that remain open and subject to examination by the relevant taxing authorities. In general, the Company’s 2019 through 2021 tax years remain open to examination. Additional years may be open to the extent attributes are being carried forward to an open year.