Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 7. INCOME TAXES

Income tax expense (benefit) includes the following components:

	Federal			State			Foreign		Total
2023
Current	$	87,461		$	24,481		$	174,223	$	286,165
Deferred		(20,795	)		(2,121	)		—		(22,916	)
	$	66,666		$	22,360		$	174,223	$	263,249
2022
Current	$	149,840		$	63,140		$	295,546	$	508,526
Deferred		(27,904	)		(5,336	)		—		(33,240	)
	$	121,936		$	57,804		$	295,546	$	475,286
2021
Current	$	126,840		$	54,484		$	328,137	$	509,461
Deferred		(3,981	)		291			—		(3,690	)
	$	122,859		$	54,775		$	328,137	$	505,771

The components of earnings before income taxes are as follows:

	2023		2022		2021
United States	$	512,682	$	987,186	$	823,009
Foreign		502,346		848,705		1,101,607
	$	1,015,028	$	1,835,891	$	1,924,616

Income tax expense differs from amounts computed by applying the United States Federal income tax rate of 21% when compared to earnings before income taxes as a result of the following:

	2023			2022		2021
Computed “expected” tax expense	$	213,156		$	385,537	$	404,169
Increase (decrease) in income taxes resulting from:
Effect of foreign taxes		27,711			32,293		46,644
State income taxes, net of Federal income tax benefit		17,665			45,665		43,272
Nondeductible executive compensation		4,965			8,019		8,981
Stock compensation expense, net		(1,321	)		454		(6,238	)
Other, net		1,073			3,318		8,943
	$	263,249		$	475,286	$	505,771

In 2023, 2022 and 2021, the Company also benefited from U.S. Federal tax credits totaling $24.1 million, $41.6 million, and $27.9 million, respectively, principally because of withholding taxes related to the Company's foreign operations, as well as U.S. income tax benefits for FDII of $16.2 million, $41.7 million, and $22.6 million, respectively. The Company's effective tax rate in 2021 benefited from significant share-based compensation deductions. These amounts were offset by the effect of higher foreign tax rates of the Company's international subsidiaries, when compared to the U.S. Federal income tax rate of 21%, as well as certain expenses that are no longer deductible under the 2017 Tax Act, including certain executive compensation in excess of amounts allowed. For the years 2023, 2022 and 2021, there was no BEAT expense and GILTI expense was insignificant.

The tax effects of temporary differences and tax credits that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows:

Years ended December 31,	2023		2022
Deferred Tax Assets:
Deductible stock compensation expense, net	$	7,199	$	9,707
Operating lease liabilities		75,659		72,506
Capitalized R&D expenses		39,723		23,246
Accrued third party obligations, deductible for taxes upon economic performance		10,878		9,601
Excess of financial statement over tax depreciation		12,532		10,280
Foreign currency translation adjustments		15,400		12,184
Retained liability for cargo claims		1,040		1,592
Provision for credit losses on accounts receivable		856		3,550
Total gross deferred tax assets		163,287		142,666
Deferred Tax Liabilities:
Unremitted foreign earnings, net of related foreign tax credits		28,275		36,542
Operating lease assets		71,322		68,675
Total gross deferred tax liabilities		99,597		105,217
Net deferred tax assets	$	63,690	$	37,449

Based on management’s review of the Company’s tax positions, the Company had no significant unrecognized tax benefits as of December 31, 2023 and 2022.

The Company is subject to taxation in various states and many foreign jurisdictions including the People’s Republic of China, including Hong Kong, Taiwan, Vietnam, India, Mexico, Brazil, Canada, Netherlands and the United Kingdom. The Company believes that its tax positions, including intercompany transfer pricing policies, are reasonable and consistent with established transfer pricing methodologies and norms. The Company is under, or may be subject to, audit or examination and assessments by the relevant authorities in respect to these and any other jurisdictions primarily for years 2009 and thereafter. Sometimes audits result in proposed assessments where the ultimate resolution could result in significant additional tax, penalties and interest payments being required. The Indian tax authority (ITA) has asserted that additional tax applies principally related to transfer pricing and transactions between and amongst the Company and its Indian subsidiary and the applicability to an Indian service tax applicable to ocean and air imports and exports. We believe that ITA’s positions are without merit, we are defending our position vigorously in Indian courts. If these matters are adversely resolved, we would recognize significant additional tax expense, including interest and penalties. The Company establishes liabilities when, despite its belief that the tax filing positions are appropriate and consistent with tax law, it concludes that it may not be successful in realizing the tax position. In evaluating a tax position, the Company determines whether it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position and in consultation with qualified legal and tax advisors.

The total amount of the Company’s tax contingencies may increase in 2024. In addition, changes in state, federal, and foreign tax laws, including transfer pricing and changes in interpretations of these laws may increase the Company’s existing tax contingencies. The timing of the resolution of income tax examinations can be highly uncertain, and the amounts ultimately paid including interest and penalties, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts recorded. It is reasonably possible that within the next twelve months the Company or its subsidiaries will undergo further audits and examinations by various tax authorities and possibly may reach resolution related to income tax and indirect tax examinations in one or more jurisdictions. These assessments or settlements could result in changes to the Company’s contingencies related to positions on tax filings in future years. The estimate of any ultimate tax liability contains assumptions based on experiences, judgments about potential actions by taxing jurisdictions as well as judgments about the likely outcome of issues that have been raised by the taxing jurisdiction. The Company cannot currently provide an estimate of the range of possible outcomes. Any interest and penalties expensed in relation to the underpayment of income taxes were insignificant for the years ended December 31, 2023, 2022, and 2021. The Company has no liability as of December 31, 2023, for the 15% corporate alternative minimum tax based on financial statement income (BMT), which became effective in 2023 in the U.S. under the Inflation Reduction Act. Some elements of the Inflation Reduction Act could be impacted by further legislative action or Treasury which could impact the estimates of the amounts the Company would record for BMT in the future. Additionally, some elements of the recorded impacts of enacted tax laws and regulation could be impacted by further legislative action as well as additional interpretations and guidance issued by the Internal Revenue Service or Treasury in the U.S. and by similar governmental bodies in jurisdictions outside of the U.S.